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Firm Entry and Wages: Impact of Wal-Mart Growth on Earnings Throughout the Retail Sector

  • Dube, Arindrajit
  • Lester, T. William
  • Eidlin, Barry

This paper estimates the effect of Wal-Mart expansion on wages, benefits, and skill-composition of retail workers during the 1990s. We exploit the spatial pattern of Wal-Mart diffusion, radiating outward from the original store in Benton county, Arkansas, to control for potential endogeneity in store openings using both instrumental variable and control function approaches. Estimates from state and county level data suggest that store openings reduced both the average earnings and health benefits of retail workers. At the county level, a new Wal-Mart is found to reduce retail earnings, on average, by .5 to .9 percent. Moreover, we find that changes in skill-composition explain only a small part of compensation reduction, indicating that the decline in retail wages reflect a reduction in labor market rents.

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Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt22s5k4pv.

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Date of creation: 06 Aug 2007
Date of revision:
Handle: RePEc:cdl:indrel:qt22s5k4pv
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  1. Emek Basker, 2007. "The Causes and Consequences of Wal-Mart's Growth," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 177-198, Summer.
  2. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
  3. 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).
  4. Hicks, Michael J. & Wilburn, Kristy L., 2001. "The Regional Impact of Wal-Mart Entrance: A Panel Study of the Retail Trade Sector in West Virginia," The Review of Regional Studies, Southern Regional Science Association, vol. 31(3), pages 305-313, Winter.
  5. 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.
  6. Emek Basker, 2003. "Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion," Labor and Demography 0303002, EconWPA, revised 11 Mar 2005.
  7. Davis, Elizabeth E. & Freedman, Matthew & Lane, Julia & McCall, Brian P. & Nestoriak, Nicole & Park, Timothy A., 2005. "Product Market Competition and Human Resource Practices: An Analysis of the Retail Food Sector," Working Papers 14349, University of Minnesota, The Food Industry Center.
  8. Fredrik Andersson & Harry J. Holzer & Julia I. Lane, 2002. "The interactions of workers and firms in the low-wage labor market," Longitudinal Employer-Household Dynamics Technical Papers 2002-12, Center for Economic Studies, U.S. Census Bureau.
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