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The Effects of Wal-Mart on Local Labor Markets

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  • Neumark, David

    () (University of California, Irvine)

  • Zhang, Junfu

    () (Clark University)

  • Ciccarella, Stephen

    () (Cornell University)

Abstract

We estimate the effects of Wal-Mart stores on county-level retail employment and earnings, accounting for endogeneity of the location and timing of Wal-Mart openings that most likely biases the evidence against finding adverse effects of Wal-Mart stores. We address the endogeneity problem using a natural instrumental variables approach that arises from the geographic and time pattern of the opening of Wal-Mart stores, which slowly spread out from the first stores in Arkansas. The employment results indicate that a Wal-Mart store opening reduces county-level retail employment by about 150 workers, implying that each Wal-Mart worker replaces approximately 1.4 retail workers. This represents a 2.7 percent reduction in average retail employment. The payroll results indicate that Wal-Mart store openings lead to declines in county-level retail earnings of about $1.2 million, or 1.3 percent. Of course, these effects occurred against a backdrop of rising retail employment, and only imply lower retail employment growth than would have occurred absent the effects of Wal-Mart.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2545.

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Length: 54 pages
Date of creation: Jan 2007
Date of revision:
Publication status: published in: Journal of Urban Economics, 2008, 63(2), 405-430
Handle: RePEc:iza:izadps:dp2545

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Keywords: Wal-Mart; location; employment;

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References

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  1. Khanna, Naveen & Tice, Sheri, 2000. "Strategic Responses of Incumbents to New Entry: The Effect of Ownership Structure, Capital Structure, and Focus," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 749-79.
  2. Thomas J. Holmes, 2006. "The Diffusion of Wal-Mart and Economies of Density," 2006 Meeting Papers 15, Society for Economic Dynamics.
  3. Emek Basker, 2002. "Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion," Working Papers 0215, Department of Economics, University of Missouri, revised 14 Jan 2004.
  4. John Chao & Norman Swanson, 2003. "Alternative Approximations of the Bias and MSE of the IV Estimator Under Weak Identification With an Application to Bias Correction," Departmental Working Papers 200315, Rutgers University, Department of Economics.
  5. Basker, Emek, 2005. "Selling a cheaper mousetrap: Wal-Mart's effect on retail prices," Journal of Urban Economics, Elsevier, vol. 58(2), pages 203-229, September.
  6. Michael J. Hicks & Kristy Wilburn, 2005. "The Locational Impact of Wal-Mart Entrance: A Panel Study of the Retail Trade Sector in West Virginia," Urban/Regional 0511011, EconWPA.
  7. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  8. Jerry Hausman & Ephraim Leibtag, 2006. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart," CeMMAP working papers CWP06/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  9. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
  10. Jerry Hausman & Ephraim Leibtag, 2004. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Working Papers 10712, National Bureau of Economic Research, Inc.
  11. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  12. Naveen Khanna, 2001. "The Bright Side of Internal Capital Markets," Journal of Finance, American Finance Association, vol. 56(4), pages 1489-1528, 08.
  13. Barnes, Nora Ganim & Connell, Allison & Hermenegildo, Lisa & Mattson, Lucinda, 1996. "Regional differences in the economic impact of Wal-Mart," Business Horizons, Elsevier, vol. 39(4), pages 21-25.
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  1. Head-Roc: Wal-Mart Is the 1 Percent
    by Head-Roc in huffington post business on 2011-11-18 21:11:55
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