- Where Pioneers Meet to Explore the Frontiers of Finance and Economics.

Monday, February 27, 2006

Wal-Mart effect...?

This weeks Economist has a great article on the Wal-Mart effect.

Check out the following summary:

[David Neumark, Junfu Zhang and Stephen Ciccarella, of the Public Policy Institute of California] ...track Wal-Mart's progress through 3,032 counties from 1977 to 1995. The arrival of a store in a typical county destroys about 180-270 retail jobs, they conclude, which suggests that each Wal-Mart associate does the job of 1.5-1.75 people at a rival. However, this does not imply a rise in overall joblessness: those displaced by Wal-Mart will tend to find work elsewhere.
What about wages? Mr Neumark and his colleagues could not measure wages directly. But they did estimate Wal-Mart's impact on retail payrolls, which averaged $13,860 per worker in their sample. The opening of a Wal-Mart store reduces these by only about 1%.

The Other Side of the Coin...

Wal-Mart may shave payrolls, but it slashes shopping bills...[Emek Basker, an economist at the University of Missouri]...estimates that the prices of goods such as toothpaste, shampoo, aspirin and laundry detergent fall by 7-13% five years after Wal-Mart's arrival in a city. Some analysts think the company has to offer lower prices to compensate customers for a less pleasant shopping experience.

[Jerry Hausman, of the Massachusetts Institute of Technology, and Ephraim Leibtag, of America's Department of Agriculture]...reckon the existence of big-box retailers, such as Wal-Mart, is a substantial boon to shoppers—equivalent to offering households 25 cents back for every dollar they spend on groceries, or about $450 a year on average.

I myself have only shopped at Wal-Mart a few times but the central argument - that "box stores" such as Wal-Mart raise real incomes and thus creates economic growth - has always seemed very plausable to me.

Posted by Trade Monkey :: 11:21 AM :: 0 comments Perma-Link

Post a Comment