Wal-Mart as Catalyst to U.S.-China Trade
AbstractRetail chains and imports of consumer goods from developing countries have grown sharply over the past 25 years. Wal-Mart’s sales, which currently account for 15% of U.S. imports of consumer goods from China, grew 90-fold over this period, while U.S. imports from China increased 30-fold. We relate these trends using a model in which scale economies in retail interact with scale economies in the import process. Combined, these scale economies amplify the effects of technological change and trade liberalization, creating a two-way relationship between the chain’s size and its sourcing choice. Falling trade barriers increase imports not only through direct reduction of input costs but also through an expanded chain and higher investment in technology. Calculations based on our model suggest that the existence of the chain more than doubles the sensitivity of imports to tariff reductions. Technological innovations account for approximately 60% of Wal-Mart’s growth from 1984–2004 and reductions in input cost, due to tariff reductions and changes in sourcing, account for 40% of this growth.
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Bibliographic InfoPaper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 01.
Length: 57 pages
Date of creation: 2011
Date of revision:
Wal-Mart; Trade; Economies of Scale; China; Technological Change; Retail Chain;
Other versions of this item:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-04 (All new papers)
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