Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion

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. JEL Numbers: J21, L11, L81 ∗[email protected]. I thank Daron Acemoglu, Olivier Blanchard and Sendhil Mullainathan for their support and guidance. I have also benefited from the comments of Josh Angrist, Saku Aura, David Autor, Glenn Ellison, Bengte Evenson, Amy Finkelstein, Guido Kuersteiner, Jeffrey Miron, Peter Mueser, Whitney Newey, Marko Terviö, Ken Troske and Howard Wall, two anonymous referees, and seminar participants at Arizona State University, the Board of Governors of the Federal Reserve System, Case Western Reserve University, the Federal Reserve Banks of Atlanta and St. Louis, Hebrew Univeristy, MIT, the Univesity of Chicago GSB, the University of Missouri, Tel Aviv University, the US Census Bureau, Washington University in St. Louis and Wellesley College. I thank Amy Mok, Steven Sadoway and David Von Stroh for their help with typing, and Dorothy Carpenter, Kathy Cosgrove, Rich Lindrooth, Erich Muehlegger, Mike Noel, Jon Zinman, and especially Maurice Drew, Catherine Friedman and Steven Sadoway for helping me gather data for this project. †This research was completed while visiting the Federal Reserve Bank of St. Louis, which I thank for its hospitality. The views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or the Federal Reserve System.