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The Effects of Wal-Mart on Local Labor Markets


David Neumark


University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Junfu Zhang


Clark University; Institute for the Study of Labor (IZA)

Stephen M. Ciccarella Jr.


Cornell University - Department of Economics; Public Policy Institute of California

January 2007

IZA Discussion Paper No. 2545

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.

Number of Pages in PDF File: 54

Keywords: Wal-Mart, location, employment

JEL Classification: J21, R12

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Date posted: January 23, 2007  

Suggested Citation

Neumark, David and Zhang, Junfu and Ciccarella, Stephen M., The Effects of Wal-Mart on Local Labor Markets (January 2007). IZA Discussion Paper No. 2545. Available at SSRN: http://ssrn.com/abstract=958704

Contact Information

David Neumark (Contact Author)
University of California, Irvine - Department of Economics ( email )
3151 Social Science Plaza
Irvine, CA 92697-5100
United States
949-824-8496 (Phone)
949-824-2182 (Fax)
HOME PAGE: http://www.socsci.uci.edu/~dneumark/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Junfu Zhang
Clark University ( email )
950 Main Street
Worcester, MA 01610
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Stephen M. Ciccarella Jr.
Cornell University - Department of Economics ( email )
414 Uris Hall
Ithaca, NY 14853-7601
United States
Public Policy Institute of California ( email )
500 Washington Street
Suite 800
San Francisco, CA 94111
United States
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