Local Welfare Effects of Walmart’s Expansion in Mexico, 2009–2020 (Los Efectos sobre el bienestar local de la expansión de Walmart, 2009-2020)
61 Pages Posted: 5 Feb 2021
Date Written: November 01, 2020
Walmart is one of the most successful companies in the world. With more than $ 524 billion in 2020 revenue and 2.2 million employees, Walmart is the world's largest company by sales volume and is ranked 19th on the Forbes list of the world's largest public companies. Walmart serves nearly 265 million consumers per week in its 11,501 stores around the world. In Mexico, Walmart entered the market since the 1990s, injecting strong competitive pressure horizontally against its competitors and vertically with suppliers. It has established new standards in the industry in the field of food and product logistics, and has promoted cheaper products, thus altering the dynamics of competition in these markets. At the end of 2019, Walmart's total revenues in Mexico amounted to $ 30.64 million.
This document summarizes an independent investigation we conducted on the effects of Walmart's expansion in Mexico from 2009 to date. The entrance of Walmart has pushed prices down in the 34 urban locations compiled in the INPC, according to evidence from the last 10 years. The effect is significant and robust, and is greater for the Bodega Aurrera formats that serve consumers in the lowest socioeconomic levels: D +, D and E. For a representative basket (an expanded basic basket of 44 products crossed with the most sold at Walmart) in stores of different channels (modern, traditional and convenience), the opening of Walmart stores reduces or maintains the prices of its competitors, in different channels, in the long term. Again, this effect is greater for the Bodega Aurrera format.
Our study also measures effects on the productivity of companies neighboring a Walmart Distribution Center (CEDI) and we found that the presence of a Walmart CEDI has increased the marginal productivity of capital in the states of the republic where it is located, consistently for 10 years. Based on this analysis and classifying companies according to their size, we find that the existence of a Walmart CEDI increases the marginal productivity of capital for large companies, which suggests that a Walmart CEDI promotes the adoption of technologies that use capital more intensively in large companies.
Note: Downloadable document available in Spanish.
Keywords: Walmart, Productivity, Prices, Local Efficiencies, Mexico, Competition
JEL Classification: K20, K21, L10, L22, L4, L5, L81, O33
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