The Walmart Effect

The Wal-mart Effect

Joseph Price November 5, 2004

Recent congressional reports have alleged that Walmart may be taking advantage of government welfare programs to subsidize its on employees. One estimate claims that this is costing California alone around $20 million a year in health insurance programs through Medi-Cal. Other allegations blame the arrival of a Wal-mart Supercenter on the destruction of the small scale mom and pop business.These allegations really bring up a larger issue of the impact that Wal- mart is having on local communities. This paper attempts to estimate the net cost or benefit on the community of having a Wal-mart store. We avoid the issue of the welfare gains of the community have access to everyday low prices and rather focus exclusively of the effects of Wal-mart on the labor market, the welfare roles, and crime. The idea of this paper will be to look at the affects of job loss on crime. We can use plant closings as an exogenous shock to jobs. This would relate to the project I started for Lars Lefgren in which we found plant closings from notable news articles and looked at the affect on crime rates in those cities. I can use the Census of Manufacturers merged with city populations to better identify towns in which there was a major job loss shock.

Another approach is to create a dataset of when walmarts were opened in different towns. The new Walmart should have two affects. The first is that it will precipitate the closing of other firms. At the same time it will provide lots of new jobs. The firm closings may be gradual, but the new hirings immediate. The question is whether the crime created by the new people who lose their jobs will outweigh the crime prevented by the jobs being provided by Walmart. A lot of this will hinge on the criminal propensity and the mobility of the small firms employees compared to those hired by

Walmart.

It would also be interesting to look at what happens to welfare roles when

Walmart is set up. This would give credence to the idea that Walmart is able to offer lower wages through the subsidy of welfare benefits.

DATA: There is a list of store openings going back to 2001, which I have pasted into an excel sheet. You can also click on the city and it will take you to a news release that gives you the address, the number of associates employed, square footage, extra stores, and how many stores, taxes and employees Walmart has in the given state at that point. Data need: Is there a way to identify relatively small towns that are isolated from other towns using some sort of GIS system. One idea is to look at freeway cities which exist to support the traffic coming through and are hence small and isolated. Such as Ontario,

OR. It would be interesting to see how the Walmart effect works in an isolated unit in terms of migration and other things.

Quinn, Bill. “How Wal-mart is Destroying America (and the World) and What you Can do About it.” 2000. (Mann HF 5429.2 Q56x 2000)

Davis, Steven, and John Haltiwanger. “Gross Job Flows” Handbook of Labor Economics, vol 3B, chapter 41.

Also article by same authors in QJE 1992, p. 819-863.

Also look at the article right before it by John Abowd.

The following datasets are at CES.census.

Longitudinal Business Database (LBD)

Observations: The LBD covers almost 24 million unique establishments from 1975 to present. Description: The Longitudinal Business Database (LBD) is a research dataset constructed at the Center for Economic Studies. Currently, the LBD contains the universe of all U.S. business establishments with paid employees from 1976 to present. The LBD is invaluable to researchers examining entry and exit, gross job flows,and changes in the structure of the U.S. economy. The LBD can be used alone or in conjunction with other Census Bureau surveys at the establishment and firm level of microdata. Sector: Business Reference Period: Calendar Year Unit of Enumeration: Establishment Industry: Combination (industries) Documentation: Documentation Limitations: Coverage: 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

I printed out a census report that describes this data.

Medicaid Eligibility Database System - California (MED) Observations: Description: The California Medicaid Eligibility Database (MED) contains information on participation in the State Medicaid program. In general, there are two files for each year: 6/xx and 12/xx. The 6/xx files contains information on the 12 months ending with 6/xx, e.g. the 6/90 file contains information covering 7/1989-6/1990. Similarly the 12/xx files contain information on the 12 months ending with 12/xx, e.g. the 12/90 file contain information covering 1/1990-12/1990. Sector: Other Reference Period: Other Unit of Enumeration: Individual Person Industry: Other (industries) Documentation: Limitations: Coverage: 1989 1990 1991 1992 1993 1994 1995 1996 1997

Medical Expenditure Panel Survey - Insurance Component Researcher Version (MEP)

Observations: Approximately 25,000 establishments per year, with data on up to 4 plans per establishment. Description: The MEPS Insurance Component (MEPS-IC) collects data on health insurance plans obtained through employers. Data collected include the number and type of insurance plans offered, benefits associated with these plans, premiums, contributions by employers and employees, eligibility requirements, and employer characteristics. Sector: Business Reference Period: Calendar Year Unit of Enumeration: Establishment Industry: Combination (industries) Documentation: Documentation Limitations: Coverage: 2001 1996 1997 1998 1999 2000 2002

Unemployment Insurance-Base Wage File -- California (UIW-CA)

Observations: Description: The California Unemployment Insurance-Base Wage files contain worker-level records from the States unemployment insurance system. Sometimes referred to ad the Employment Development Department (EDD) file. Sector: Other Reference Period: Three (3) Months Unit of Enumeration: Individual Person Industry: Other (industries) Documentation: Limitations: Coverage: 1991 1992 1993 1994 1995 1996 1997 1998 1999

Census of Population and Housing, 2000: Public Use Microdata Sample (PUMS), 5-Percent Sample U.S. Bureau of the Census. Washington, DC: U.S. Bureau of the Census, 2003. [producer]. Washington, DC: U.S. Bureau of the Census, 2003. [distributor]. Note: Super-PUMA and PUMA maps in PDF format are available at http://www.census.gov/geo/www/maps/puma5pct.htm. Codebook: CEN2000-008.05. At CISER