New research indicates that WM's creative destruction made poverty reduction slightly harder in the 1990s:
Counties that gained a Wal-Mart store experienced smaller reductions in family poverty rates during the economically strong 1990s than did counties not gaining a Wal-Mart store, according to a new study by a rural economist in Penn State's College of Agricultural Sciences.The study examined the effect of the retailing chain on county poverty rates. Stephan Goetz, professor of agricultural and regional economics and faculty affiliate in Penn State's Center for Economic and Community Development, explains that, even during the economic upswing of the 1990s, counties that added a Wal-Mart store during the decade saw their poverty rate decline by a smaller amount than did counties not adding a store.
"The average family poverty rate declined nationwide by more than 18 percent between 1990 and 2000," he says. "The statistical model developed for this study suggests that the net predicted effect of a new store was relatively small, amounting to a 0.2 percentage point higher poverty rate for one new store, 0.4 percentage points for two new stores, and so forth compared to the counties where no new store was added.
"Furthermore, the 0.2 percent increase in the family poverty rate associated with one new store represents 8.3 percent of the 18.3 percent national reduction in the poverty rate during the 1990s. In other words, the ability of those counties that gained a Wal-Mart to decrease the poverty rate during the decade was reduced by about 8 percent relative to those counties that did not gain a new store."
Goetz says the effect, while small, is statistically significant and remains after other factors affecting changes in poverty over time are accounted for, including initial poverty and whether the county already had a Wal-Mart at the beginning of the decade. A possible explanation for this finding -- that Wal-Mart deliberately seeks out impoverished communities to locate new stores, and that these communities may in turn have more difficulty reducing poverty over time -- doesn't hold up, according to the researcher.
Press release here. Full report here. (I'm still reading it). The analyses seem straightforward, but I'm not convinced of any of the explanations offered... They admittedly don't adjust for the relatively lower price level in WM dominated areas.
Posted by Kevin on October, 29 2004 at 10:04 AM
