Urban Fold

Study Calls Into Question Walmart's Economic Development Bona Fides

A study just published in Economic Development Quarterly documents the geographical destruction on local businesses wrought by a new Walmart store, and raises questions about its long-term impact on sales tax revenues, reports Nate Berg.

The study, authored by a team led by University of Illinois Chicago economics professor Joe Persky, looked at the effect of the opening of a Walmart store on existing businesses and found a direct geographic correlation with rates of closure.

"No matter which direction you go from Walmart, there's a very high rate of business closures in the immediate vicinity, and the further away you get there's less and less," says Persky. According to Berg, "Persky and his colleagues found that for every mile closer to the Walmart, 6 percent more stores closed. Close in around the store's location, between 35 and 60 percent of stores closed." 

"The research also shows that during the study period, from 2006 to 2008, overall sales tax revenues went down in the two ZIP codes closest to or encompassing the Walmart," notes Berg. 

Granted the study only focused on the effect of one Walmart store, located in the Austin neighborhood of Chicago's West side. It also failed to "include any data on stores that opened during the 2006 to 2008 period, just those that closed."

"Walmart disputes these findings and argues that its stores are magnets for both growth and economic development," says Berg.

Full Story: Radiating Death: How Walmart Displaces Nearby Small Businesses

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