The Effects of Wal-Mart on Local Labor Markets

47 Pages Posted: 21 Feb 2006 Last revised: 13 Mar 2021

See all articles by David Neumark

David Neumark

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

Junfu Zhang

Clark University; IZA Institute of Labor Economics

Stephen M. Ciccarella

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

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.

Suggested Citation

Neumark, David and Zhang, Junfu and Ciccarella, Stephen M., The Effects of Wal-Mart on Local Labor Markets (November 2005). NBER Working Paper No. w11782, Available at SSRN: https://ssrn.com/abstract=851691

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Junfu Zhang

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Stephen M. Ciccarella

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