Do large retailers affect employment? Evidence from an emerging economy

Abstract

This article studies the effect of the emergence of large retailers (hypermarkets and department stores) on employment in the commerce sector in the regions of Chile. We use a panel with quarterly data from 11 Chilean regions for the period 1996 to 2004. Our results indicate that the entry of large retailers produces a discrete increase in employment in the commerce sector in the quarter that the entry occurs. We also find that there is an additional positive effect on employment throughout the year entry occurs, suggesting that suppliers or other parts of the chain of production follow the large retailer into the local market. However, after the first year of the entry there is a partial reversion, suggesting that smaller retailers exit or contract in response to the entry of the large retailer. The net effect on employment of the entry of a large retailer is an increase of 300 jobs.

Acknowledgements

We are grateful to Rodrigo Cerda, Loreto Lira and Will Mullins for valuable comments. The authors gratefully acknowledge financial support from DyS. The views expressed in this article are those of the authors and do not necessarily reflect those of DyS.

Notes

¹ Dickinson and Urbany (1994), Foster et al. (2002), Guariglia (2002), Basker2005a, 2005b and Lira et al. (2005).

² The metropolitan region i.e. Santiago, Chile's capital, is not included in this study. Given that Chile is highly centralized, with Santiago concentrating 40% of the population and 47% of GDP, the capital could be studied separately, using the different areas of the city as units of analysis. Unfortunately, we do not have data on the variables used in this study by areas (counties) of Santiago.

³ This result is consistent with Guariglia (op. cit) who finds that superstores have an overall positive net effect on employment in Great Britain.

⁴ Hypermarket is defined as a supermarket with an area larger than 6000 square meters (Lira, 2005).

⁵ These are Falabella, Almacenes Paris and Ripley.

⁶ The fact that the income variable is not statistically significant, suggests that the increase in employment in this sector over time is captured by the time effect.