The Northeast Regional Center for Rural Development
The Pennsylvania State University
7 Armsby Building, University Park PA 16802-5602
814/863-4656(phone); 814/863-0586(fax)
Please send questions and comments to:
nercrd@psu.edu
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Big Boxes and Local Economic Development:
What the science says
1. Wal-Mart and Social Capital (or Civic Capacity)
This study suggests that the presence of Wal-Mart stores is associated with lower stocks of social capital or “civic capacity.” We examined the effects of Wal-Mart stores that existed at the beginning of the 1990s decade and the effects of new stores that were built during the 1990s on the level of social capital stocks at the end of the 1990s decade. In both cases, the effect on social capital was statistically significant and negative. This result holds after we control for other variables known to affect social capital stocks in a community.
In terms of specific components of the social capital measure, new Wal-Mart stores located during the 1990s were associated with fewer social capital-generating organizations (such as bowling alleys or membership organizations), reduced voter participation rates in the 2000 presidential election, fewer non-profit organizations per capita and lower rates of church adherence. Wal-Mart stores in place at the beginning of the decade were associated with reduced voter participation in the 2000 election and fewer non-profits, but greater Census participation and higher church adherence rates.
Click here for:
The academic article: Wal-Mart and Social Capital
The county-level measure of social capital: http://www.nercrd.psu.edu/Social_Capital/index.html
To cite this article:
Goetz, Stephan J. and Anil Rupasingha (2006), “Wal-Mart and Social Capital,” American J. of Agric. Economics, 88 (5), 1304-1310.
2. Wal-Mart and Self-Employment (or Entrepreneurship)
This study finds that the presence of Wal-Mart stores reduces the number of self-employed workers as a share of the total labor force in communities, on the one hand, and that it also raises the returns to self-employment endeavors, on the other. This finding is consistent with Joseph Schumpeter’s prediction of creative destruction in an entrepreneurial, market-based economy.
Click here for:
The Academic article: Explaining Self-Employment Success and Failure: Wal-Mart vs. Starbucks
The report: http://www.nercrd.psu.edu/Publications/rdppapers/rdp33.pdf
To cite this study:
Goetz, Stephan J. (Sept. 2006), “The Place-Based Structural Determinants and Effects of Self-Employment,” Report to the Ewing Marion Kauffman Foundation. The Northeast Regional Center for Rural Development, Penn State University, University Park, PA, 64 pp.
Available at: http://www.nercrd.psu.edu/Publications/rdppapers/rdp33.pdf
3. Wal-Mart and Poverty
This study finds that the presence of Wal-Mart stores made it more difficult for communities to reduce their poverty rates during the booming 1990s decade. The presence of the chain is associated with higher poverty rates, even after a host of factors that cause poverty are held constant. The study controls for (or removes the influence of) the possibility that Wal-Mart might choose to locate its stores in higher-poverty counties. In fact, the study also finds that the chain avoids counties with more poverty, all else equal.
The higher poverty rate is a so-called “externality” that the chain creates for local communities. Externalities are costs created by one entity that are paid or borne by others. One conclusion of this work is that the chain is not the engine of economic growth that some believe it to be, and that communities need to consider very carefully whether or not to provide infrastructure or other development subsidies to the chain.
Click here for:
The issues brief.
The academic article: Wal-Mart and County-wide Poverty
Popular books that cite this study:
Fishman, Charles (2006) The Wal-Mart Effect. The Penguin Press, New York.
Mitchell, Stacy (2006) Big-Box Swindle, Beacon Press, Boston.
To find weblogs and newspaper articles discussing this study, enter the following search terms into Google [news]: Goetz Wal-Mart Poverty
To cite this article:
Goetz, Stephan J. & Swaminathan, Hema (2006), “Wal-Mart and County-Wide Poverty,” Social Science Quarterly 87 (2), 211-226.
4. Other Points about Wal-Mart (this section is under development)
1. In many small communities, Wal-Mart is such a large employer that it likely operates as a monopsony or oligopsony buyer of labor services.
2. Wal-Mart is a major actor in land markets
