The Effects of Wal-Mart on Local Labor Markets
University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics
Clark University; IZA Institute of Labor Economics
Stephen M. Ciccarella Jr.
Cornell University - Department of Economics; Public Policy Institute of California
IZA Discussion Paper No. 2545
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.
Number of Pages in PDF File: 54
Keywords: Wal-Mart, location, employment
JEL Classification: J21, R12
Date posted: January 23, 2007