Competition and labor productivity in India's retail stores

•Newly available data on India's retail stores is utilized.•The data show over 60 percent of retail stores face no significant competition.•OLS and Instrumental variables regressions show that greater competition improves labor productivity.•Conservative estimates suggest improvement in labor productivity by 36 percent from pro-competitive reforms.

Using newly available data compiled by the World Bank's Enterprise Surveys, we analyze the relationship between competition and output per worker for retail stores in India. The OLS and IV regressions show a significant positive relationship between competition and output per worker. There is also considerable scope for pro-competitive reforms with 62 percent of the surveyed stores reporting facing no significant competition. According to our conservative estimates, pro-competitive reforms could improve labor productivity by as much as 36 percent of its current level.