The following are some conclusions drawn by Prof. Emek Basker in his new Journal of Economic Perspectives article "The Causes and Consequences of Wal-Mart's Growth".
Wal-Mart's productivity advantage is due to "its large and early investment in information technology."
"Wal-Mart's biggest and most obvious effect is that it provides lower prices to consumers. The competitive effect of Wal-Mart has lowered prices that consumers pay even when they do not shop at Wal-Mart; but this pressure also reduces the profitability of other stores and in some cases causes stores, especially small ones, to shut down....Wal-Mart's effect on jobs is likely to be modest and is likely to be positive, but its effect on wages requires further investigation."
There are a couple of other points worth noting in Prof. Basker's article. One area of economic dislocation has been in the area of small, domestic suppliers who can not meet Wal-Mart's requirements for information technology. And, quite interestingly, he quotes another study by Prof. Panle Jia as stating the the economic effects of Wal-Mart are very similar to those of K-Mart. So why does Wal-Mart generate such negative reaction from our cultural elites compared to other discount retailers? Of course, Wal-Mart's roots are in Arkansas compared to Minnesota (Target), California and Washington State (Costco), and Michigan and Illinois (K-Mart and and the former Sears). In a map provided by Prof. Basker, it appears that as recently as 1989 Wal-Mart was completely unrepresented in the DC-Boston and San-Diego to Seattle corridors. And, according to Prof. Basker, Wal-Mart shoppers have obviously lower average incomes than the customers of the two rivals he reports (Target and Costco). Hmm. I wonder. WWJHO? (Where would Jesus hang out?) We report. You decide.
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