Economics

The effects of Wal-Mart on local labor markets

Document Type

Article

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 $1.4 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. © 2007 Elsevier Inc. All rights reserved.

Publication Title

Journal of Urban Economics

Publication Date

3-2008

Volume

63

Issue

2

First Page

405

Last Page

430

ISSN

0094-1190

DOI

10.1016/j.jue.2007.07.004

Keywords

earnings, employment, Wal-Mart

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