Wal-Mart, Oligopsony Power and Entry: an Analysis of Local Labor Markets
AbstractWal-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 InfoPaper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49599.
Date of creation: 2009
Date of revision:
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Wal-Mart; oligopsony power; entry; wages; Industrial Organization; Labor and Human Capital; L13; L81; J42;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
This paper has been announced in the following NEP Reports:
- NEP-AGR-2009-05-16 (Agricultural Economics)
- NEP-ALL-2009-05-16 (All new papers)
- NEP-LAB-2009-05-16 (Labour Economics)
- NEP-URE-2009-05-16 (Urban & Real Estate Economics)
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