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Wal-Mart, Oligopsony Power and Entry: an Analysis of Local Labor Markets

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  • Bonanno, Alessandro

Abstract

Wal-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.

Suggested Citation

  • Bonanno, Alessandro, 2009. "Wal-Mart, Oligopsony Power and Entry: an Analysis of Local Labor Markets," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49599, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea09:49599
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    File URL: http://purl.umn.edu/49599
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    Keywords

    Wal-Mart; oligopsony power; entry; wages; Industrial Organization; Labor and Human Capital; L13; L81; J42;

    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

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