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The Effects of Wal-Mart on Local Labor Markets

Author

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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.

Suggested Citation

  • Neumark, David & Zhang, Junfu & Ciccarella, Stephen, 2007. "The Effects of Wal-Mart on Local Labor Markets," IZA Discussion Papers 2545, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2545
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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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