Wednesday, February 13

So what does Wal Mart do to the local labour market when it opens?

Pretty much straight forward, I would have said when I read this paper. But the challenge is to consider whether all relative factors are considered? Would you say that there is such a high inefficiency (40%!!!) in local labour markets that a Wal Mart worker is equal to 1.4 local workers? I can understand that country level retail earnings will drop but will they ship in better workers? Of course not, so the productivity difference is evidenced by better computers, better supply chains, better purchasing, etc. etc.

Very curious results.

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.

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