Thursday, March 02, 2006

Wal-Mart and County Wide Poverty

A paper by Stephan J. Goetz and Hema Swaminathan of the Dept. of Agricultural Economics and Rural Sociology at the Penn. State University can be found here and a pdf version here.

These authors conclude: After carefully and comprehensively accounting for other local determinants of poverty, we find that the presence of Wal-Mart unequivocally raised family poverty rates in US counties during the 1990s relative to places that had no such stores.

The authors questioned why this happened. One fascinating possibility was that by destroying the local class of entrepreneurs, the Wal-Mart chain also destroys local leadership capacity. The destructon of small, locally owned businesses may also reduce civic capacity, an essential ingredient for economic growth.

The paper contains the data and the statistics, but a less academic interpretation can be found here.

The article concludes with the following: "Community leaders hoping to expand their region's employment base by 'landing' a Wal-Mart will be disappointed," Goetz says. "What we think is happening is that, although Wal-Mart may increase the real purchasing power in a community by offering lower-priced goods, the store is so tremendously efficient in deploying its workers that the net employment effect is zero."

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