JOB CREATION OR DESTRUCTION? LABOR MARKET EFFECTS OF WAL-MART EXPANSION
Emek Basker*
Abstract—This paper estimates the effect of Wal-Mart expansion on retail employment at the county level. Using an instrumental variables approach to correct for both measurement error in entry dates and endogeneity of the timing of entry, I find that Wal-Mart entry increases retail employment by 100 jobs in the year of entry. Half of this gain disappears over the next five years as other retail establishments exit and contract, leaving a long-run statistically significant net gain of 50 jobs. Wholesale employment declines by approximately 20 jobs due to Wal-Mart’s vertical integration. No spillover effect is detected in retail sectors in which Wal-Mart does not compete directly, suggesting Wal-Mart does not create agglomeration economies in retail trade at the county level.
I.
Introduction
al-Mart Corporation employs nearly one million workers in the United States—more than any other private company—and over 300,000 additional workers worldwide. It is rumored to have plans to hire as many as 800,000 additional workers in the next five years. USA Today quotes a retail-industry consultant as saying that Wal-Mart “created more jobs in the 1990s than any other company” (Hopkins, 2003). Has Wal-Mart created more jobs than it destroyed? Given the level of public interest in Wal-Mart and other “big box” retailers, there has been surprisingly little independent research on their impact on local labor markets.1 Research into this question is hampered by paucity of data on Wal-Mart and the other large retail chains and by concerns about endogeneity of the entry decision. Firms respond to local conditions when they expand or relocate establishments—more so in the nontradable retail sector than in tradable sectors (like manufacturing)—so it is difReceived for publication December 5, 2002. Revision accepted for publication February 19, 2004. * University of Missouri. I thank Daron...