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Wal-Mart as Catalyst to U.S.-China Trade

Emek Basker

University of Missouri - Department of Economics

Van H. Pham

Baylor University - Department of Economics

April 2008

Retail chains and imports of consumer goods from developing countries have grown sharply over the past 25 years. Wal-Mart's sales, which currently account for 15% of U.S. imports of consumer goods from China, grew 90-fold over this period, while U.S. imports from China increased 30-fold. We relate these trends using a model in which scale economies in retail interact with scale economies in the import process. Combined, these scale economies amplify the effects of technological change and trade liberalization, creating a two-way relationship between the chain's size and its sourcing choice. Falling trade barriers increase imports not only through direct reduction of input costs but also through an expanded chain and higher investment in technology. Calculations based on our model suggest that the existence of the chain more than doubles the sensitivity of imports to tariff reductions. Technological innovations account for approximately 60% of Wal-Mart's growth from 1984-2004 and reductions in input cost, due to tariff reductions and changes in sourcing, account for 40% of this growth.

Number of Pages in PDF File: 56

Keywords: Wal-Mart, Trade, Economies of Scale, China, Technological Change, Retail Chain

JEL Classification: L11, L81, F12

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Date posted: May 21, 2007 ; Last revised: April 9, 2008

Suggested Citation

Basker, Emek and Pham, Van H., Wal-Mart as Catalyst to U.S.-China Trade (April 2008). Available at SSRN: http://ssrn.com/abstract=987583 or http://dx.doi.org/10.2139/ssrn.987583

Contact Information

Emek Basker (Contact Author)
University of Missouri - Department of Economics ( email )
118 Professional Building
Columbia, MO 65211
United States
573-882-6023 (Phone)
573-882-2697 (Fax)
HOME PAGE: http://web.missouri.edu/~baskere/
Van H. Pham
Baylor University - Department of Economics ( email )
One Bear Place #98003
Waco, TX 76798
United States
(254) 710-3521 (Phone)
(254) 710-6142 (Fax)
HOME PAGE: http://www.baylor.edu/van_pham
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References:  64
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