Walmart Supercenters and Monopsony Power: How a Large, Low-Wage Employer Impacts Local Labor Markets
Walmart Supercenters and Monopsony Power: How a Large, Low-Wage Employer Impacts Local Labor Markets
Author: Justin C Wiltshire
Abstract: This paper considers the extent and impact of monopsony power exercised by Walmart Supercenters. I address the issue of potential bias from endogenous store entry, as well as other identification concerns, by adopting a stacked synthetic control approach to estimate average county-level labor market effects of the Walmart Supercenter roll-out across the U.S. Crucially, I construct the pools of synthetic control donor counties from novel observations of counties where Walmart tried to open a Supercenter but was blocked by local efforts. I find Supercenter entry caused significant reductions in local aggregate employment and earnings. Retail employment concentration grew, as retail employment initially jumped up before reverting to pre-entry levels. In counties with a Supercenter, subsequent exogenous minimum wage increases led to significant growth in aggregate and retail employment. These results run counter to predictions for competitive labor markets, and indicate Walmart Supercenters gradually accumulated and exercised monopsony power in their local markets for labor, with negative consequences for workers
Date Added: 3/28/2023, 9:16:00 AM
Seminar Notes:
Venue: CES Seminar 2023
Objective: To understand the effect of entry of a Walmar Supercenter on the local economy - what evidence is there that it has monosony power, what is the effect on workers
Importance: Existing literature disagrees about Walmart's labor market effects.
May also be important for understanding effects of minimum wage
Background: Between 1990 and 2005 Walmart opened 2000 Supercenters - selling both general merchandise and other retail products (groceries, pharmacy,...) Employed 300-500 people per store.
Nearly 4 million employees between 1996-2002. Became largest private sector employer in 1999 and has retained that status
Data & Key Variables:
QCEW - Employment and earnings
Dun & Bradstreet DMI data - retail employment concentration
Holmes (2011) - Supercenter entry timing & address
Sprawl-Busters blog (confirmed with local news & council minutes) - 39 counties where Walmart was blocked
Methodology: County-by-county stacked synthetic control, using variation from counties attempting to block Walmart from entering
Results: Supercenters decrease employment, lfp, and earnings
Increase in retail employment and retail share of local employment in short run, but retail employment reverts back to original level after a few years
Minimum wages increased employment in places with a Walmart Supercenter
Comments: Allsynth Stata package
Key Table/Figure:
