WalMart and Wages

Steven S. CuellarDepartment of EconomicsSonoma State University

1801 East Cotati Ave.Rohnert Park CA 94928

The Diffusion of Wal Mart

The First Wal Mart opened in Rogers, Arkansas in 1962

By 2005 there were 3,243 stores in the U.S.

The First Wal Mart opened in Rogers, Arkansas in 1962

How Can Wal Mart Reduce Wages?

Competitive Model of the Labor Market

S=MC

D

Wage/HourWage/Hour

Firm

LaborLabor

Labor Market

S

D

WC

lCLC

Monopsony Model of the Labor Market

Wage/Hour

Labor

Monopsonist

S

D

WM

MC

LD

WC

LC

Overview of Wages

U.S. Wage Inequality

U.S. College-High School Wage Differential

California

Sonoma County

Sonoma County

• WalMart opened in Rohnert Park in 1992

• WalMart opened in Windsor in 1999

Sonoma County Wages

Sonoma County Wages

Napa / Fairfield /Vallejo

• WalMart opened in Vallejo in 1991

• WalMart opened in Fairfield in 1993

• WalMart opened in Napa in 2001

Napa / Fairfield /Vallejo Wages

Napa / Fairfield /Vallejo Wages

Combined Data Set of Indexed Wages

Regression Fitted to the Combined Data Set

Preliminary Regression ResultsEstimated Coefficients Wages

Constant 135.097

(12.11)**

time -12.95

(2.00)*

time2 0.769

-0.92

Wal Mart Dummy -51.557

(3.19)**

Wal Mart Interaction 15.626

(2.34)*

Wal Mart Interaction2 -0.851

-1.02

Observations 391

R-squared 0.11

Absolute value of t-statistics in parentheses

* significant at 5% level; ** significant at 1% level

Chow Test For Structural Change

Chow Test F-Statistic = 13.597634

Critical F-Statistic = 2.628088

Wagei = β0 + β1Timei + β2Time2i + β3WalMart + β4WalMart*Time + β5WalMart*Time2 +ui

H0: β3 = β4 = β5 =0

H1: At least one does not equal zero