Abstract
This issue of Economic Development Quarterly focuses on the economic development impact of WalMart stores. With more than two million workers, WalMart is now the largest private employer in the United States. WalMarts are now found in major metropolitan areas as well as small towns and medium-sized cities. The simple logic of retail economics would suggest that WalMarts can have little net effect on a region’s economic activity; however, WalMarts can move activity within a region from one community to another. Business and political supporters have touted new WalMarts as potential engines of economic growth at the community level. Opponents have claimed that WalMarts have little to contribute to economic development. Whether we look at competing small towns or rival neighborhoods in a metropolitan area, the question remains: Do WalMarts build microeconomies? Exploring this question is central to all the studies collected here.
In a highly useful survey article, Alessandro Bonanno and Stephan Goetz provide a review of the academic literature on WalMart as a community economic development strategy. As they note, the literature is extensive, “spanning economics, sociology, and regional science among other fields.” Their survey starts by examining the serious methodological issues that plague the field. They go on to summarize and assess the existing research on the impacts of WalMarts on local employment, other economic variables, and social indicators. Bonanno and Goetz demonstrate that for each outcome measure (with the exception of price-effects) researchers are still split on the positive and negative effects of WalMart on local economies. That conclusion motivates the continuing research in the field and, more specifically, the other articles in this issue.
One of the earliest and most influential studies reviewed by Bonanno and Goetz is that of Kenneth Stone, whose 1988 article on the impact of WalMart stores in Iowa blazed the trail in this area. We are lucky to have Stone and his coauthor, Georgeanne Artz, present their most recent update on WalMart impacts on towns in Iowa. Tracing an area’s retail sales back 15 years before a WalMart opening and following those sales for 15 years since that opening, they find initial gains for host towns, followed by declines. Only in the general merchandise sector does the gain persist, and here the WalMart stores most likely “captured sales from other host town categories that compete with them.” Overall host towns did still perform somewhat better than their pre-opening trend.
In approaching the question of WalMart’s impact, Michael Hicks, Stan Keil, and Lee Spector focus not so much on the microgeography of WalMart expansion, as on what happens to the size distribution of retail firms in a region. In their study of Indiana, they find the most sizable employment impacts on competing big-box format stores. Rather than small downtown retailers they find, “It is the Ames, Sears, and K-Mart’s that seem to have suffered most when WalMart arrived.” Over time, these initial declines are then more than offset. The authors find that this class of relatively large retailers actually expands in response to a WalMart opening.
The last article in the collection, our own study of the first WalMart to open within the Chicago city limits, questions whether any positive employment effects can be found in the local zip codes closest to the new arrival. Closings of smaller retailers in the immediate vicinity of the opening WalMart just about offset the expansion of employment in the new WalMart itself. This offset was calculated after controlling for the high rates of small store closures experienced in neighboring zip codes. This zero-sum result is supported by total retail sales data as well. At least for the first Chicago WalMart, we find no evidence that it built up its new community area.
The articles in this issue provide a review and sampling of the research on WalMart and community economic development. As can be seen here, considerable disagreement still exists as to the net effects of a new WalMart location. Where an auto plant or a high-tech research park brings a range of economic development benefits to a community, the economic development benefits generated by a new big-box retailer are far less obvious. While these articles do not focus on policy implications, the research results reported here suggest great caution in subsidizing WalMart retail locations.