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Does Walmart Hurt Social Capital?

- December 8, 2008


bq. Social capital has attracted increasing attention in recent years. We use county-level and individual survey data to study how Wal-Mart affects social capital. Estimates using several proxies for social capital—such as club membership, religious activity, time with friends, and other measures—do not support the thesis that “Wal-Mart destroys communities” by reducing social capital. We measure exposure to Wal-Mart two ways: Wal-Marts per 10,000 residents and Wal-Marts per 10,000 residents aggregated over the years since 1979 to capture a more cumulative “Wal-Mart Effect.” We find that the coefficients on Wal-Mart’s presence are statistically insignificant in most specifications.

In other words, “no.” The paper is by Art Carden, Charles Courtemanche, and Jeremy Meiners. This finding isn’t necessarily surprising, in their view, as Wal-Mart’s effect on social capital is “theoretically ambiguous”:

bq. Wal-Mart could reduce social capital in several ways. First, Wal-Mart might be a symptom of forces speeding the pace of life, leaving fewer resources for social capital building. Second, Wal-Mart leads to dislocation and relocation of production, as “that ugly box on the edge of town” siphons business away from Main Street. If downtown shopping creates interconnectedness, then we may expect to see reductions in social capital when Wal-Mart moves to town.

bq. Wal-Mart may also increase social capital. First, the company builds social capital directly through community programs. Second, Wal-Mart may reduce the time cost of shopping, leaving more time for social-capital producing activities. Finally, the income effect for social capital might be large enough to cancel out the substitution effect even as material consumption gets cheaper. In other words, we substitute away from social capital and toward material consumption after Wal-Mart comes to town and makes material consumption cheaper; however, “Always Low Prices” leave us with more total resources to devote to consumption of both social capital and material goods.

bq. Consider a consumer who spends his money on bowling, which builds social capital, and baubles, which do not. Wal-Mart’s entry reduces the price of baubles. If the income effect for bowling is relatively small, we may see a net reduction in social capital as a result of Wal-Mart’s entry. However, if there is a relatively strong income effect for bowling, Wal-Mart might not reduce social capital.

Find the paper here (gated) or here (gated on SSRN). I can’t find an ungated version. See also this blog post. See also their research on Wal-Marts and obesity.

[Hat tip to Eric Lawrence.]

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