Business Churn and the Retail Giant: Establishment Birth and Death from Wal-Mart's Entry*
Direct correspondence to Carlena Cochi Ficano, Hartwick College. Dr. Ficano share all data and coding for replication purposes.
The size and scope of Wal-Mart's operation gives it the potential to noticeably impact the local economies in which it locates. This analysis examines separately the establishment birth and death rate implications of Wal-Mart's entry into a community as a means of reconciling the inconsistency between sizable documented poverty effects and more limited employment and payroll changes from Wal-Mart.
I estimate instrumented county and year fixed effects regressions of county establishment birth rate and establishment death rate on the predicted number of Wal-Mart stores and years of operation in a county for the retail sector, the aggregate local economy, and the manufacturing sector, where the latter serves as a falsification test.
I find that within 15 months of a new Wal-Mart store entry, between 4.4 and 14.2 existing retail establishments and close while at most 3.5 new retail establishments open.
The article provides new and strong evidence that, through its effect on establishment births and deaths, Wal-Mart's expansion has had a larger impact on the employment situations of those working in retail than net employment and payroll numbers would indicate.