Wal-Mart and County-Wide Poverty

Authors


  • *Direct correspondence to Stephan J. Goetz, Department of Agricultural Economics and Rural Sociology, 7E Armsby Bldg., The Pennsylvania State University, University Park, PA 16802-5602 〈sgoetz@psu.edu〉. The research underlying this article was supported in part by USDA/CSREES-National Research Initiative Competitive Grants Program 2003-35401-12936. Earlier versions of this article were presented at the American Agricultural Economics Association Annual Meeting, Denver, Colorado, August 1–3, 2004 and at the Rural Sociological Society Annual Meeting in Sacramento, California, August 12–15, 2004. The authors thank session participants and Martin Shields for their comments. Opinions expressed are those of the authors, and their affiliation appears for informational purposes only. Goetz will supply data and coding information used in this work for those wishing to replicate the study.

Abstract

Objectives. This study seeks to identify the independent effect of Wal-Mart stores on changes in U.S. family-poverty rates at the county level. We draw on the contributions of a number of disciplines to enhance our understanding of the broader forces that influence poverty.

Methods. A key innovation is that we estimate a two-stage regression model, in which an instrument is created for new Wal-Mart stores from a location equation; this reduces any potential endogeneity bias in the poverty-change equation. In addition, we use spatial econometric methods to correct for spatial dependence bias.

Results. After controlling for other factors determining changes in the poverty rate over time, we find that counties with more initial (1987) Wal-Mart stores and counties with more additions of stores between 1987 and 1998 experienced greater increases (or smaller decreases) in family-poverty rates during the 1990s economic boom period.

Conclusions. Wal-Mart creates both benefits and costs to communities in which the chain locates. These benefits and costs need to be weighed carefully by community decisionmakers in deciding whether to provide public subsidies to the chain.

Ancillary