Abstract
This research estimates fiscal impacts of Wal-Mart in Ohio from 1985 through 2003. Using a panel of counties, and accounting for spatial autocorrelation in an instrumental variable model I estimate impact of Wal-Mart and Super-Centers on selected revenues and transfer payments. Among the findings is that the presence of a Wal-Mart increases local commercial property tax assessments resulting in collection increases of between $350,000 and $1.3 million. There is also an 18–43% reduction in per capita EITC claims in a county. However, Medicaid expenditures experience growth which amount to roughly 16 additional cases attributable to a single Wal-Mart. The magnitude and statistical certainty of these findings, suggests that local fiscal intervention, either through incentives or a “Wal-Mart Tax” is unwarranted.
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Notes
See Stone (1989, 1995, 1997) these papers restate many of the same findings, but with further analysis of the cause and the interim changes to the state of the literature. Also see Stone, Artz, & Myles, (2002). These studies also offer both policy guidance and recommendations for retailers coexisting with Wal-Mart.
See http://www.preservationist.net/sprawl for a remarkably balanced review by an advocacy group of this and other studies.
The choice of the two time period model permitted the use of more detailed (but less frequently collected) Census and USDA data on poverty and regional population characteristics.
As I have earlier said, I believe the claims of benefit based externalities are on very shaky theoretical ground. Even the most compelling of these arguments (Waddoup & Jeffrey, 2004) asserts market failure for employer based health insurance in the construction industry based upon an argument of scale economies in the provision of private sector health insurance (both in financial access and firm production costs).
This is all the more remarkable given that Carlson’s work is an undergraduate honors thesis, authored, one might well hope, by a young woman currently engaged in graduate economic education. Sadly, there would be much to recommend in Miller (as this paper will suggest) were it even to enjoy the pretense of balance.
Even the harsh critics of Wal-Mart (Dube & Jacobs, 2004) compare estimates of Wal-Mart wages against regional averages and unionized retail firms (not comparable discount firms).
Indeed, it might well be argued that analysis of labor markets would provide more fruitful policy than simply targeting a firm that has been successful in changing retail markets (see Reich, 2005).
See http://www.goodjobsfirst.org for a frequently updated list of these states. In May 2005, Maryland’s Governor Ehrlich vetoed SB 790/HB 1284, the Fair Share Health Care Fund Act, which required selected firms to pay at least 8% of total employee expenses in health care related activities. This legislation was clearly targeting Wal-Mart stores in Maryland (though it certainly could effect others). A detailed examination of state policies effecting Supercenter development was also produced for the California Governors Office of Planning and Research (Clanton and Duffy, 2004).
See Sheridan, Ellis, & Marountas, (2003) for review of Ohio’s fiscal structure.
A recent case sought to generate reforms that would alter the local funding mechanism, and while it ultimately prevailed in litigation, saw no important structural adjustments to the state tax policy. See DeRolph et al. v. The State of Ohio, 2001.
Gross (2004) found that residential development generates $1.05 in local fiscal expenditures to each dollar in revenues raised, while either commercial or industrial development costs only $0.38 per dollar revenue collected.
This author resides in an Ohio township and is subject to different county, city, and township taxes (but exempt from city income taxes, though the township is located within the city).
The Brookings Institution Metropolitan Policy Program offers downloadable data on EITC payments, filers, and total returns at a number of geographic levels in the United States.
Unit root tests are available from the author.
In 2001 and 2002 the author has had extensive discussions with several local developers who are retained by Wal-Mart to develop potential properties. In each case, the developers clearly stated that the choice of county and location within county are wholly independent of economic growth (and while it seems unfathomable, these developers are largely ignorant of population and regional economic dynamics). These findings are also supported by Franklin (2001) Graff (1998) and Goetz & Swaminathan (2004).
Including the recursive spatial autocorrelation value (as in Hicks & Wilburn, 2001) did not substantially change the results, while introducing concerns about the instrument validity and so is not reported.
Estimates of this kind aggregating Wal-Mart and Supercenters yield roughly similar results on impacts. Importantly, the Supercenters account for the bulk of new entrance nationwide in the most recent years.
See Hicks (2005a) for Medicaid review in the context of Wal-Mart.
There are a number of other considerations regarding the change in retail structure in general, and Wal-Mart specifically which researchers have sought fit to explore, but on which I pleasingly remain silent. These range from the sociology of central place to local architectural aesthetics.
See the AFL-CIO memorandum dated March 31, 2005 for a discussion of the Wal-Mart Tax.
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The views expressed in this paper are those of the author and do not reflect the official policy or position of the U.S. Air Force, Department of Defense, or the U.S. Government.
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Hicks, M.J. Wal-Mart’s Impact on Local Revenue and Expenditure Instruments in Ohio, 1988–2003. Atl Econ J 35, 77–95 (2007). https://doi.org/10.1007/s11293-006-9062-6
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DOI: https://doi.org/10.1007/s11293-006-9062-6