Beyond expectations? The local economic effects of a large shopping mall

Abstract We examine the local economic effects of the 2012 opening of RioMar Recife, a large-scale shopping mall in Recife, Brazil, using a georeferenced panel of firms covering 2005–2019. We exploit variation in proximity to the mall through concentric distance rings (up to 500 meters, 500 meters–1 km, and 1–2 km) and implement a Difference-in-Differences (DiD) framework combined with Propensity Score Matching (PSM). We find strong and spatially concentrated effects: firms within 500 meters increase employment and wages substantially, with effects that decay monotonically with distance but remain statistically significant up to 2 km. Event study estimates support the parallel trends assumption and show no evidence of pre-treatment dynamics. We show that these effects are primarily driven by the expansion of incumbent firms rather than new firm entry, indicating that agglomeration economies operate through the intensification of existing activity. We also document important heterogeneities: gains are larger for firms with more skilled workers, in managerial occupations, and in consumption- and service-related sectors. However, benefits are unevenly distributed across demographic groups, with stronger effects for male and white workers. These results are robust to alternative control groups and to placebo tests based on both timing and spatial location. Overall, we show that large urban commercial developments act as localized economic hubs, generating positive but spatially bounded externalities. Our findings contribute to the literature on place-based policies and urban agglomeration by providing causal evidence from developing countries such as Brazil, where such interventions play a central role in shaping urban economic dynamics.