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. |
