Abstract

The effect of Wal-Mart in the United States is a growing concern as people evaluate the possible positive and negative effects of Wal-Mart’s businesses practices on America. Even though Wal-Mart provides low prices for their customers, some studies have found that Wal-Mart may have a negative impact on wages, the number of people receiving government transfer payments, and even poverty. The purpose of this paper is to determine if Wal-Mart causes an increase in the poverty rates of U.S. states, or if Wal-Mart chooses to locate to states with high poverty rates. We find that the presence of Wal-Mart does not have a significant impact on poverty, but that states with higher rates of poverty are likely to have more Wal-Mart locations. One possible explanation for Wal-Mart choosing to locate to states with higher poverty rates is that Wal-Mart may have a higher number of customers in states where there is a higher occurrence of poverty. Our findings are noteworthy in the debate about Wal-Mart’s business practices, because the presence of Wal-Mart in poorer states may serve to inhibit economic growth in those locations.