Firm Entry and Wages: Impact of Wal-Mart Growth on Earnings Throughout the Retail Sector

Institute of Industrial Relations Working Paper No. iirwps-126-05

56 Pages Posted: 10 Nov 2005

See all articles by Arindrajit Dube

Arindrajit Dube

University of California, Berkeley - Institute for Research on Labor and Employment

T. William Lester

University of California, Berkeley - Institute of Industrial Relations

Barry Eidlin

McGill University; University of Wisconsin-Madison; Rutgers School of Management and Labor Relations

Date Written: August 7, 2007

Abstract

This paper estimates the effect of Wal-Mart expansion on wages, benefits, and skill-composition of retail workers during the 1990s. We exploit the spatial pattern of Wal-Mart diffusion, radiating outward from the original store in Benton county, Arkansas, to control for potential endogeneity in store openings using both instrumental variable and control function approaches. Estimates from state and county level data suggest that store openings reduced both the average earnings and health benefits of retail workers. At the county level, a new Wal-Mart is found to reduce retail earnings, on average, by .5 to .9 percent. Moreover, we find that changes in skill-composition explain only a small part of compensation reduction, indicating that the decline in retail wages reflect a reduction in labor market rents.

Keywords: Wal-Mart, Retail, Wage Inequality, Monopsony, Labor Market Rents

JEL Classification: J31, J38, L81

Suggested Citation

Dube, Arindrajit and Lester, T. William and Eidlin, Barry, Firm Entry and Wages: Impact of Wal-Mart Growth on Earnings Throughout the Retail Sector (August 7, 2007). Available at SSRN: https://ssrn.com/abstract=841684 or http://dx.doi.org/10.2139/ssrn.841684

Arindrajit Dube (Contact Author)

University of California, Berkeley - Institute for Research on Labor and Employment ( email )

2521 Channing Way #5555
Berkeley, CA 94720
United States
510-642-9951 (Phone)

HOME PAGE: http://www.irle.berkeley.edu/cwed/dube.html

T. William Lester

University of California, Berkeley - Institute of Industrial Relations ( email )

Berkeley, CA 94720
United States

Barry Eidlin

McGill University ( email )

Canada
(514) 398-6852 (Phone)

HOME PAGE: http://www.barryeidlin.org

University of Wisconsin-Madison ( email )

Department of Sociology
1180 Observatory Drive
Madison, WI WI 53706-1393
United States
5107592339 (Phone)

HOME PAGE: http://www.barryeidlin.org

Rutgers School of Management and Labor Relations ( email )

Piscataway, NJ 08854
United States

HOME PAGE: http://www.barryeidlin.org

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