The power of corporations

Recently I ran regressions of wages and labor force composition on the density of Walmarts in States. Walmart — the largest private employer in the U.S. with sales of over $350B or about 3% of GDP — has had zero effect on wages and labor force composition in aggregate. This was much to my disappointment because zero results don’t get published.

This (non-)result suggests that the largest corporation on the planet has little effect on the macro economy. How does one square this fact with the narrative of the omnipotently evil multinational corporation? Does it make sense to compare GDPs to sales (or profits) of corporations? If not, what is a good way to compare the power of corporations to the power of nations?

12 thoughts on “The power of corporations”

  1. Not to be the “lit review” police or anything but there’s a substantial literature on this (including a JEP paper which is usually a good place to start) that ought to be noted. I’m pretty sure that the literature tends to find positive effects (except for Neumark.)

    Also, precisely estimated zeros are certainly publishable but usually only if they are surprising (which might be because they are inconsistent with the existing literature). So if your identification strategy or data is better than what folks have done before, it sounds like you’d have a good paper.

  2. Perhaps I misunderstood initially. So the difference is that you’re looking at aggregate employment and the existing literature looks at local labor markets? Much harder to get exogenous variation at the aggregate level.

  3. The first one that comes to mind is David Card’s famous paper on the effect of the Mariel Boatlift (immigration) on native’s employment. Interestingly enough, it was not published in one of the top general interest journals but I would imagine it’s one of the most cited papers in labor economics in the last 20 years. Card also has an affirmative action paper that finds no effect. Fryer and Levitt have a QJE paper that finds no effect of “distinctively black names” on outcomes (although they do find that it is a signal of socioeconomic status).

  4. I don’t know enough about the history/geneology of the first paper, but a zero result isn’t surprising using growth models. You’d expect short run effects of an increase in labor supply that goes away as the economy approaches the steady state.

    The second paper is really 5 zero results, but their discontinuity design seems weird. Close union votes suggest workers are close to indifferent between the expected payoffs of unionization and the expected payoffs of non-unionization. For there to be indifference, wages and employment (and thus output, productivity and survivability) can’t be that different between the two groups (in expectation). Given rational expectations, zero results are expected with that design. In other words, Dinardo and Lee are really testing the rational expectations assumption not the effects of unions.

  5. Just to clarify, my last comment is only meant to imply that the “bar for what results must look like” is not necessarily super high. Zeros can be okay. Even predictable zeros as you pointed out.

    The papers discussed surely exceed a very high bar.

  6. Hi Will,
    I just happened to see this because I have an MBA student who is doing a project on Wal-Mart for my class. She might like to comment (in her project) on whether Wal-Mart’s policies affect the overall landscape of business. Do you know of other studies in this area? How confident are you regarding your unpublished result? Would you mind being a resource for her?

  7. She may be interested in the effect of walmart on the “mom and pop” sector (Sobel/Dean 2007) or the local retail labor market (Basker 2005, Neumark et al 2008).

    I’m very confident that when you look at variation in walmart density at the state level, you get a zero effect on the labor market task composition (manual vs routine tasks) and zero impact on those tasks’ relative wages.

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