Wal-Mart, Oligopsony Power and Entry: an Analysis of Local Labor Markets

Alessandro Bonanno

No 49599, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: Wal-Mart, the largest retailer worldwide, has been suspected of exercising market power over input providers, both merchandise suppliers and workers. However, in spite of a growing body of literature investigating the beneficial economic impact of the company through its price-lowering effect, research analyzing the company’s economic impact over input suppliers is limited. This paper presents a general framework which can be used to investigate Wal-Mart’s market power over input suppliers, vis-à -vis a variation in input productivity, focusing on homogenous intermediate goods supplied locally. The model is general enough to account for incumbents’ reaction to Wal-Mart’s entry resulting in exit, entry and changes in the production technology. A simplified version of the theoretical model is tested using data on local labor markets. Preliminary results show Wal-Mart having a wage lowering effect due mainly to the increased productivity of labor, while the increase in oligopsony power counts only for 15% of such effect.

Keywords: Wal-Mart; oligopsony power; entry; wages; Industrial Organization; Labor and Human Capital; L13; L81; J42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-lab and nep-ure
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:ags:aaea09:49599

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