WalMart and Wages
Steven S. Cuellar
Department of Economics
Sonoma 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
The First Wal Mart opened in Rogers, Arkansas in 1962
By 2005 there were 3,243 stores in the U.S.
How Can Wal Mart Reduce Wages?
Competitive Model of the Labor Market
Labor Market Firm
Wage/Hour Wage/Hour
S
WC S=MC
D
D
LC Labor lC Labor
Monopsony Model of the Labor Market
Monopsonist
Wage/Hour MC
S
WC
WM
D
LD LC Labor
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 Results
Estimated 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
Wagei = β0 + β1Timei + β2Time2i + β3WalMart + β4WalMart*Time + β5WalMart*Time2 +ui
H0: β3 = β4 = β5 =0
H1: At least one does not equal zero
Chow Test F-Statistic = 13.597634
Critical F-Statistic = 2.628088