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 $1.4 million, or 1.5 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11782.
Length: Date of creation: Nov 2005 Date of revision: Publication status: published as Forthcoming in Journal of Urban Economics Handle: RePEc:nbr:nberwo:11782
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Find related papers by JEL classification: J2 - Labor and Demographic Economics - - Demand and Supply of Labor J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs R1 - Urban, Rural, and Regional Economics - - General Regional Economics
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