Wal-Mart as Catalyst to U.S.-China Trade

Emek Basker and Van Pham Hoang ()
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Van Pham Hoang: Baylor University

No 1, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: Retail chains and imports of consumer goods from developing countries have grown sharply over the past 25 years. Wal-Mart’s sales, which currently account for 15% of U.S. imports of consumer goods from China, grew 90-fold over this period, while U.S. imports from China increased 30-fold. We relate these trends using a model in which scale economies in retail interact with scale economies in the import process. Combined, these scale economies amplify the effects of technological change and trade liberalization, creating a two-way relationship between the chain’s size and its sourcing choice. Falling trade barriers increase imports not only through direct reduction of input costs but also through an expanded chain and higher investment in technology. Calculations based on our model suggest that the existence of the chain more than doubles the sensitivity of imports to tariff reductions. Technological innovations account for approximately 60% of Wal-Mart’s growth from 1984–2004 and reductions in input cost, due to tariff reductions and changes in sourcing, account for 40% of this growth.

Keywords: Wal-Mart; Trade; Economies of Scale; China; Technological Change; Retail Chain (search for similar items in EconPapers)
JEL-codes: F12 L11 L81 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2011
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http://depocenwp.org/upload/pubs/PhamHoangVan/Wal- ... 0Trade_DEPOCENWP.pdf (application/pdf)

Related works:
Working Paper: Wal-Mart as Catalyst to U.S.-China Trade (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:dpc:wpaper:0111

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