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Wal-Mart, Oligopsony Power and Entry: an Analysis of Local Labor Markets

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  • Bonanno, Alessandro
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    Abstract

    Wal-Mart, the largest retailer worldwide, has been suspected of exercising market power over input providers, both merchandise suppliers and workers. However, in spite of a growing body of literature investigating the beneficial economic impact of the company through its price-lowering effect, research analyzing the company’s economic impact over input suppliers is limited. This paper presents a general framework which can be used to investigate Wal-Mart’s market power over input suppliers, vis-à-vis a variation in input productivity, focusing on homogenous intermediate goods supplied locally. The model is general enough to account for incumbents’ reaction to Wal-Mart’s entry resulting in exit, entry and changes in the production technology. A simplified version of the theoretical model is tested using data on local labor markets. Preliminary results show Wal-Mart having a wage lowering effect due mainly to the increased productivity of labor, while the increase in oligopsony power counts only for 15% of such effect.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49599.

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    Date of creation: 2009
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    Handle: RePEc:ags:aaea09:49599

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    Keywords: Wal-Mart; oligopsony power; entry; wages; Industrial Organization; Labor and Human Capital; L13; L81; J42;

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