“The Effects of Wal-Mart on Local Labor Markets” by Junfu ZHANG
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 variable 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 180 workers, implying that each Wal-Mart worker replaces approximately 1.5 retail workers. This represents a 3.2 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 $2.3 to $2.8 million, or 2.8 percent.