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Wal-Mart’s Monopsony Power in Local Labor Markets

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Author Info

  • Alessandro Bonanno

    ()
    (University of Connecticut)

  • Rigoberto A. Lopez

    ()

Abstract

Despite considerable debate as to Wal-Mart’s impact on retail workers, to date there has been little structural analysis on the topic. This paper measures and tests for Wal-Mart’s monopsony power in local labor markets using a dominant-firm model and data on contiguous U.S. counties where the company operates. Empirical results show that Wal-Mart’s monopsony power over workers varies significantly across the country, being higher in rural counties, particularly in the south. For instance, Wal-Mart’s buying power index in labor markets in rural southern central states is estimated to be 6% or higher while the impact on northeastern states’ wages is negligible. The results suggest that this is not a nationwide problem.

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File URL: http://fmpc.uconn.edu/publications/rr/rr103.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 103.

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Length: 33 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:zwi:fpcrep:103

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Keywords: Wal-Mart; monopsony power; wages; labor; retailing;

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References

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  1. Jerry Hausman & Ephraim Leibtag, 2005. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart," NBER Working Papers 11809, National Bureau of Economic Research, Inc.
  2. Noel, Michael & Basker, Emek, 2007. "The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry Into The Supermarket Industry," University of California at San Diego, Economics Working Paper Series qt4nq8d4sm, Department of Economics, UC San Diego.
  3. 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.
  4. Neumark, David & Zhang, Junfu & Ciccarella, Stephen, 2007. "The Effects of Wal-Mart on Local Labor Markets," IZA Discussion Papers 2545, Institute for the Study of Labor (IZA).
  5. Dube, Arindrajit & Lester, T. William & Eidlin, Barry, 2007. "Firm Entry and Wages: Impact of Wal-Mart Growth on Earnings Throughout the Retail Sector," Institute for Research on Labor and Employment, Working Paper Series qt22s5k4pv, Institute of Industrial Relations, UC Berkeley.
  6. Gorter, Cees, et al, 1997. "On the Endogeneity of Output in Dynamic Labour-Demand Models," Empirical Economics, Springer, vol. 22(3), pages 393-408.
  7. Paul W. Bauer & Yoonsoo Lee, 2006. "Estimating GSP and labor productivity by state," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Mar.
  8. Emek Basker, 2003. "Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion," Labor and Demography 0303002, EconWPA, revised 11 Mar 2005.
  9. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
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Cited by:
  1. Alessandro Bonanno, 2010. "An empirical investigation of Wal-Mart's expansion into food retailing," Agribusiness, John Wiley & Sons, Ltd., vol. 26(2), pages 220-242.

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