California Accepted Papers Paper:
Walmart and the EITC
*Names in bold indicate Presenter
In 1988 Walmart opened the doors of its Supercenter store in Washington, Missouri--the first of nearly 2000 such stores the company would open in the United States over the following two decades. The substantial labor needs of these Supercenters were two to four times those of a typical Walmart discount store, with most Supercenters employing well over 300-500 workers, often for wages at or near the mandated minima which would have made them eligible for an Earned Income Tax Credit (EITC). The largest-by-far means-tested transfer program in United States, the EITC is a refundable tax credit available to low-income workers. Often referred to as one of the most effective anti-poverty tools, it generally attracts support from across the political spectrum because it ostensibly `tops up' the incomes of low-wage earners, incentivizing work without distorting labor markets in ways a minimum wage might.
I examine the impact of Walmart Supercenter entry on county-level EITC receipts over the period 1990-2005. Entry of a Supercenter could cause higher local EITC receipts if it drew new workers into lower-wage jobs, if it increased the lower-wage retail-sector’s share of local employment, or both. To deal with endogenity concerns regarding timing and location of store entry, I adopt a two-pronged estimation strategy. I first employ an event-study design with county and state-by-year fixed effects to account for changes in state-level EITC policies, avoiding the location-of-entry issue present when unit-assignment to treatment is non-random (as the marginal treatment effects are estimated off of the average pre-treatment linear trend of the treated counties only). This approach allows for unobserved confounds at the county level, provided the effects of those confounds remains fixed in time. To allow for the possibility that the impact of unobserved confounds does not remain constant at the county-level, I then adopt a ‘comparative case study’ approach, using a synthetic control estimation strategy with many treated units, and constructing the donor pool using a newly-collected dataset which observes counties which successfully blocked entry of a planned Walmart Supercenter during the period. Both approaches tell the same story: opening at least one Walmart Supercenter increased retail’s share of local employment, leading to lower overall per-worker earnings and per-capita EITC receipts that were 3-5% higher after 5 years. Despite this, the labor force participation rate was unaffected. The results are significant and robust to a number of alternative specifications and sample restrictions. The warehouse-stores of another large retailer, Costco, typically employ fewer people at higher wages, and I find no evidence that Costco entry led to higher local EITC receipts.
I examine the impact of Walmart Supercenter entry on county-level EITC receipts over the period 1990-2005. Entry of a Supercenter could cause higher local EITC receipts if it drew new workers into lower-wage jobs, if it increased the lower-wage retail-sector’s share of local employment, or both. To deal with endogenity concerns regarding timing and location of store entry, I adopt a two-pronged estimation strategy. I first employ an event-study design with county and state-by-year fixed effects to account for changes in state-level EITC policies, avoiding the location-of-entry issue present when unit-assignment to treatment is non-random (as the marginal treatment effects are estimated off of the average pre-treatment linear trend of the treated counties only). This approach allows for unobserved confounds at the county level, provided the effects of those confounds remains fixed in time. To allow for the possibility that the impact of unobserved confounds does not remain constant at the county-level, I then adopt a ‘comparative case study’ approach, using a synthetic control estimation strategy with many treated units, and constructing the donor pool using a newly-collected dataset which observes counties which successfully blocked entry of a planned Walmart Supercenter during the period. Both approaches tell the same story: opening at least one Walmart Supercenter increased retail’s share of local employment, leading to lower overall per-worker earnings and per-capita EITC receipts that were 3-5% higher after 5 years. Despite this, the labor force participation rate was unaffected. The results are significant and robust to a number of alternative specifications and sample restrictions. The warehouse-stores of another large retailer, Costco, typically employ fewer people at higher wages, and I find no evidence that Costco entry led to higher local EITC receipts.
