Academic journal article Atlantic Economic Journal

Wal-Mart's Impact on Local Revenue and Expenditure Instruments in Ohio, 1988-2003

Academic journal article Atlantic Economic Journal

Wal-Mart's Impact on Local Revenue and Expenditure Instruments in Ohio, 1988-2003

Article excerpt

Introduction

Few issues receive as much debate in local communities as the expected opening of a Wal-Mart. Over the past 20 years communities across the United States (and increasingly worldwide) have seen both benefits and costs associated with the entrance of the retailing giant Wal-Mart, a Wal-Mart Supercenter, or related stores.

Proponents of Wal-Mart expansion see the opportunities for new flexible employment, the addition of an anchor store and specialty shops with accompanying economic growth and, of course, convenient shopping with low priced goods and services. The potential for greater local tax revenues also apparently interests some local officials. Residents who favor market economies often see Wal-Mart as evidence that efficiencies are rewarded by markets, and are pleased at its growth.

Opponents of Wal-Mart stores foretell the loss of competing retail stores, a change in current land use patterns (or sprawl) and worry that workers will be compelled to accept jobs at lower wages, with fewer benefits. There is also concern that Wal-Mart will provide less support to local activities (charities, little league, etc.) than do incumbent retailers. Finally, sympathetic local leaders argue that public expenditures, both in infrastructure and services will exceed any potential tax revenue gains from a new Wal-Mart store.

There is also national voice to this debate. Reason Public Policy Institute and the National Center for Policy Analysis have both weighed into the debate voicing free market support for Wal-Mart citing several studies. Two prominent economists at the University of Chicago (Becker & Posner, 2005) have covered many of the workforce issues in their economics blog, effectively challenging the intellectual rigor of the anti-Wal-Mart campaign. In contrast, many national unions, notably the AFL-CIO and UFCW, struggling to reverse the trend of declining membership, oppose Wal-Mart, where unionization has been almost wholly unsuccessful. Wal-Mart has been singled out for its extensive use of local and state tax incentives and local infrastructure financing, and for having employees who receive public assistance (primarily Medicaid and the Earned Income Tax Credit). Finally, the purported role Wal-Mart plays in engendering global commerce attracts opposition from a host of anti-globalization forces who are applying their credo of thinking globally and acting locally.

Whatever arguments one favors, there can be no doubt that these issues are compelling local policy considerations that deserve serious analysis. And, while one seemingly violation of the law of scarcity is that there is never a shortage of ill informed cranks, even a casual observer would conclude that these debates have been increasingly informed by research.

The early case studies and static comparisons of Wal-Mart impacts gave way to more advanced econometric studies of commercial impacts. The scholarly research has also examined the role of firm level productivity, while advocacy research has focused on the fiscal impacts--primarily expenditures by state and local governments.

This paper presents analysis designed to better inform the debate by estimating some of the fiscal impacts associated with the presence of a Wal-Mart. I begin with a review of the existing literature, which is followed by a description of the region under analysis. I then construct an empirical model and explain the data which populates it. Finally, I offer estimation considerations and results, and finish with a summary and policy discussion.

Studies of Wal-Mart

Serious empirical evaluation of the role of Wal-Mart on local economies began with Ken Stone's (1989) study of the impact of Wal-Mart on small towns and communities in Iowa. This study and other subsequent analysis by Stone and coauthors present mixed evidence regarding the impact of Wal-Mart. The studies find that counties with Wal-Marts, and host towns generally experience a sharp, but short term growth in retail. …

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