The Effects of Wal-Mart on Local Labor Markets

54 Pages Posted: 23 Jan 2007  

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 Jr.

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

Multiple version iconThere are 2 versions of this paper

Date Written: January 2007

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.

Keywords: Wal-Mart, location, employment

JEL Classification: J21, R12

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: https://ssrn.com/abstract=958704

David Neumark (Contact Author)

University of California, Irvine - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Junfu Zhang

Clark University ( email )

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Worcester, MA 01610
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stephen M. Ciccarella Jr.

Cornell University - Department of Economics ( email )

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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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