Does Wal-Mart Cause an Increase in Anti-Poverty Program Expenditures

1
Does Wal-Mart Cause an Increase in Anti-Poverty
Program Expenditures EMPIRICAL EVIDENCE

• by Michael Hicks
• state level panel data analysis (ignores AK and
  HI), with controls for time spatial
  autocorrelation and local government mix and
  policy changes

• Findings
• The number of Wal-Marts, and their employment
  share in the retail sector, have no impact on
  food stamp expenditures.
• Using the number of stores in a state to test for
  the impact of Wal-Marts presence, states with
  more stores (and increasing the number of stores
  in a state over time) do not have higher
  AFDC/TANF expenditures (do not see increases in
  AFDC/TANF expenditures)
• Using the retail employment share as a measure of
  Wal-Marts presence, the impact is negative. In
  other words, as the share of retail employment
  going to Wal-Mart increases, welfare expenditures
  decrease a 1 increase in Wal-marts share has
  been found to reduce AFDC/TANF expenditures by
  3.3.
• Wal-Marts presence increases Medicaid
  expenditures by 898 per worker, consistent with
  other studies of the Medicaid costs per low wage
  worker

2
Wal-Marts Local Impact on Wages and Employment
Dynamics in Pennsylvania EMPIRICAL EVIDENCE

• by Michael Hicks
• follows a panel of PA counties that saw entrance
  of Wal-Marts in 2002

• Findings
• New stores have no effect on existing employee
  wages in retail sector.
• New retail sector hires (overall) experience a
  0.50 per hour increase in total compensation in
  the quarter Wal-Mart enters.
• Entrance of Wal-Mart draws employees from
  existing businesses, reducing their job creation
  and increasing flows.
• Wal-Marts long term effect on net employment is
  an increase of approximately 50 jobs in a year.
  This effect was also found in Hicks and Wilburn
  (2001) and Basker (2005)
• Wal-Mart entrance reduces retail job sector
  turnover by over 40.

3
Wal-Marts Impact on Retail Trade Sector in West
Virginia EMPIRICAL EVIDENCE

• by Hicks Wilburn (2001)
• follows a panel of 55 WV counties that saw
  entrance of Wal-Marts and tests impacts in both
  entering and adjacent counties
• Controls for endogeneity of entrance decision
  applies spatial analysis

• Findings
• Entrance of Wal-Mart results in a net increase in
  employment (55 jobs)
• Entrance of Wal-Mart results in a mild increase
  in the number of firms (five) in the Retail Trade
  sector (SIC 52).

4
Wal-Marts Impact on Local Fiscal Health in Ohio
EMPIRICAL EVIDENCE

• by Michael Hicks
• follows a panel of OH counties between 1985 and
  2003 that saw entrance of Wal-Marts and tests for
  impacts on revenues and transfer payments
• Controls for endogeneity of entrance decision
  applies spatial analysis

• Findings
• Presence of Wal-Mart increases local commercial
  property tax assessments resulting in
  collection increases between 350,000 and 1.3
  million.
• Wal-Mart entry increases local labor force
  participation rates.
• Presence of a Wal-Mart dramatically increases per
  capita earned income tax credit claims between
  18 and 43.
• Negligible impact of Wal-Mart on Food stamps
  expenditures.
• Wal-Mart has no impact on either TANF or earlier
  AFDC expenditures.
• Each Wal-Mart entry increases Medicaid
  expenditures equivalent to an additional 16
  cases per county.

5
The Effects of Wal-Mart on Local Labor Markets
A National County Level Study EMPIRICAL EVIDENCE

• by David Neumark, Junfu Zhang and Stephen
  Ciccarella
• Estimates effects of Wal-Mart on county level
  employment and earnings
• Controls for endogeneity of entrance decision
  applies spatial analysis
• OLS and IV results dramatically different

• Findings
• In retail sector, Wal-Mart stores reduce overall
  retail employment between 2 and 4.
• Statistically non-robust finding that retail
  payrolls decline by 3.5.
• Statistically non-robust finding that Wal-Mart
  increases TOTAL employment by 2.
• Statistically non-robust finding that TOTAL
  payrolls per person decline by nearly 5

6
The Economic Impact of Wal-Mart Supercenters on
Existing Businesses in Mississippi EMPIRICAL
EVIDENCE

• by Kenneth Stone, Georgeanne Artz and Albert
  Myles
• Estimates impact of Wal-Mart supercenters on
  sales of existing businesses
• Uses data from sales tax reports to analyze
  changes in sales of food stores, general
  merchandise stores, furniture stores, building
  materials stores, miscellaneous retail stores and
  total county sales

• Findings
• Annual general merchandise sales increase
  dramatically - by 41 in host counties and
  decreased slowly in non-host counties.
• Existing food store sales declined between 10
  and 20 over five year period in host-counties.
  Non-host county grocery sales unaffected.
• Furniture stores in host counties experience
  sales increases. Furniture stores in non-host
  counties experience sales decreases.
• Wal-Mart supercenters capture between 2 and 12
  of miscellaneous retail sales from host counties.
  Sales in non-host counties unaffected.
• Total sales in host counties increase by 3 to 5
  per year. Non-host counties lose a small amount
  of total sales.

7
Consumer Benefits from Increased Competition in
Shopping Outlets EMPIRICAL EVIDENCE

• by Jerry Hausman and Ephraim Leibtag
• Estimates consumer benefits from entry into
  markets for food.
• Applies standard discrete choice utility model
• Uses household panel data to follow shopping
  patterns over time and control for fixed effect
  of their shopping behavior.

• Findings
• Substantial consumer benefits from the presence
  of supercenters.
• Estimates direct effects - average overall food
  price differences between supercenters and
  traditional stores for over 20 specific foods and
  finds that supercenters lower prices between 5
  and 48 for these items.
• Estimates indirect effects how increased
  competition results in lower prices at existing
  outlets and find that food prices fall by 0.75
  per year as a result of this competition.
• Estimates direct impacts of consumer welfare
  using a virtual price approach and finds that
  the compensating variation for food expenditures
  averages 25 of average expenditures per month
  with the largest gains to poor and minority
  households (30) and smallest to wealthiest (20)
  these are enormous gains, particularly since
  poor spend larger portions of their expenditures
  in supercenters than non-poor.

8
Selling a Cheaper Mousetrap Wal-Marts Effect on
Retail Prices EMPIRICAL EVIDENCE

• by Emily Basker
• Estimates effects of Wal-Mart on average
  city-level prices for variety of consumer goods
  using 20 year panel of data

• Findings
• Wal-Mart entry results in average short-run price
  decreases of between 1.5 and 3.0
• Wal-Mart entry results in average long-run price
  decreases of between 6.0 and 12.0 at the city
  level.

9
The Economic Impact of Wal-Mart EMPIRICAL
EVIDENCE

• by Global Insight
• Estimates effects of Wal-Mart on overall U.S.
  economy and on Dallas-FW economy
• Estimates impact of entry on county composition
  and levels of retail employment

• Findings
• Expansion of Wal-Mart between 1985-2004 led to a
  cumulative decline in food prices of 9.2and also
  a cumulative decline in goods prices of 4.2 and
  a ceteris paribus decline in national CPI of
  3.1.
• These price declines have led to a cumulative
  amount of consumer savings of 263 billion.
• Wal-Marts impact on the U.S. economy has been a
  net positive resulting in an increase in
  210,000 net jobs over the period.
• U.S. Total Factor Productivity increased by 0.75
  more due to Wal-Mart than it otherwise would have
  been.
• Nominal wages are 2.2 lower in the U.S.
  resulting in a net increase in real disposable
  income of 0.9.

10
The Economic Impact of Wal-Mart EMPIRICAL
EVIDENCE, continued

• by Global Insight

• Findings, continued
• Cumulative cost savings in Dallas-FW are 4.0.
• Wal-Mart has led to a net increase of 6,300 jobs
  in Dallas-FW.
• Real disposable income has increased by 2.6 in
  Dallas-FW.
• At the county level, short term retail employment
  increases by 137 jobs after the entry of a
  150-350 person store and long-term increases of
  97.
• At the county level, there are net job declines
  in in food stores and apparel and accessory
  stores, but to net job increases in building
  materials, garden supplies and general
  merchandise stores.