Working Paper: NBER ID: w11782
Authors: David Neumark; Junfu Zhang; Stephen Ciccarella
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.
Keywords: Walmart; local labor markets; employment; earnings; instrumental variables
JEL Codes: J2; J3; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Walmart store openings (L81) | county-level retail employment (R39) |
| Walmart store openings (L81) | county-level retail earnings (R19) |
| Walmart store openings (L81) | lower retail employment growth (J23) |