Walmart Supercenters fight food insecurity

Charles Courtemanche, Art Carden, Xilin Zhou, Murugi Ndirangu

Food security is a concern even in industrialised countries, with 14.5% of US households lacking food security during at least some of the year 2012. This column examines the impact of Walmart Supercenters’ entry into the local market and finds that it improves food security, especially among low-income households and households with children. It suggests that the unintended consequences of policies aimed at thwarting Walmart’s market entry may reduce food security for the most vulnerable segments of society.

A few years ago, the USDA’s Food and Nutrition Service launched a research initiative that asked scholars to look into food security. The USDA defines food security as “access by all household members at all times to enough food for an active, healthy life” (USDA 2018). In 2012, 14.5% of US households lacked food security during at least some of the year (Coleman-Jensen et al. 2013). What we found in our study (Courtemanche et al. 2019) might be surprising to some people but unsurprising to others: Walmart Supercenters improve food security, especially among low-income households and households with children.

The finding makes intuitive sense but at first glance, the relationship is theoretically ambiguous. It’s easy to see that Walmart Supercenters sell a lot of food, including fresh vegetables and lean meats; however, it’s possible that Supercenter entry into the local market crowds out other suppliers of fresh fruits and vegetables and leaves people, on net, with less access to healthy food – or even less access to food overall.

There’s an analogy here to the theoretically possible effect of Supercenter entry on employment and wages: competitive effects mean some businesses might close, which means the net increase in employment due to Walmart entry will be smaller than the number of people Walmart hires (Basker 2005). What’s more, the change in retail employment after Walmart-entry might even be negative (Neumark et al. 2008). The direction of the effect, to say nothing of its magnitude, isn’t clear until we examine the data.

Simple correlational analyses can paint an inaccurate picture of the relationship between Supercenter entry and food security – if anything, they suggest Walmart actually worsens food security. This isn’t reliable for a couple of reasons. First, there’s the question of reverse causality. Food insecurity might cause Walmart entry in the same way that crime causes police officers, and illness causes doctors. Second, if both Supercenter entry and food security are correlated with a market’s unobserved characteristics, then correlations will not reflect causal effects.

To get around this, we turn to an instrumental variables regression similar to that used by Courtemanche and Carden (2011) to study the effect of Walmart Supercenters on obesity, Neumark et al. (2008) to study Walmart’s effect on employment, and Dube et al. (2007) to study the effect on employment and wages. Specifically, we note that the diffusion pattern of Walmart Supercenters is very similar to the diffusion pattern of Walmart discount stores, with entry predicted in part by distance from Bentonville, Arkansas, and distance from food distribution centres. We use distance from Bentonville and year to predict entry by a Walmart Supercenter, and this, in turn, allows us to estimate the causal effect of a Supercenter on food security.

So how is food security measured? Every year, the US Census Bureau’s Current Population Survey includes a Food Security Supplement that asks respondents questions like “In the last 12 months, did you or other adults in the household ever cut the size of your meals or skip meals because there wasn’t enough money for food?” and “In the last 12 months, did you ever cut the size of any of the children’s meals because there wasn’t enough money for food?”.1

Three or more affirmative answers means a household is ‘food insecure’. ‘Child food insecurity’ is defined as two or more affirmative answers to the questions that pertain to children. Eight or more affirmative answers in households with children or six or more in households without children means ‘Household very low food security’, while five or more affirmative answers to the eight child-specific questions means ‘Child very low food security’. The data allow us to build three sets of individual-level control variables: demographic characteristics, economic characteristics, and assistance in other government food assistance programs.

Ultimately, we find that across a range of empirical specifications Walmart Supercenter entry reduces the likelihood that someone is ‘food insecure’, with the largest effects coming for low-income households (though middle-income households also benefit) and households with children.

Importantly, our study is silent on what people buy, and evidence from Volpe et al. (2013) suggests a greater proportion of ‘unhealthy’ purchases due to Supercenter entry. Courtemanche and Carden (2011) estimate a positive relationship between Supercenter entry and obesity, and someone can be ‘food secure’ even if the only foods purchased are highly processed junk foods. According to Allcott et al. (forthcoming),2 however, it is consumer demand and not the food environment that explains the lion’s share of the so-called nutrition gap between high-income and low-income households.

If we can be so bold, we think this study is an interesting illustration of something students learn in their introductory economics classes: the importance of unintended consequences. First, Walmart’s executives, managers, and employees didn’t set out to reduce food insecurity. They’re in it for the money, but in “intend[ing] only [their] own gain” they are “led by an invisible hand to promote an end which was no part of [their intention]”, to borrow a famous passage from Adam Smith.

Second, this study illustrates the unintended consequences of policies aimed at thwarting entry by Walmart and other retailers. We doubt that anyone on any city council or working for a community organisation that has sought to block Walmart entry has done so because they want to reduce food security among low-income households and households with children – but reducing food security is apparently one of the consequences of restrictions on Walmart entry.

Changes in retail technology matter in a lot of different ways. Our data suggest that the development and diffusion of Walmart Supercenters have improved food security – and so there is another consideration local leaders will want to keep in mind when crafting retail policy. And – importantly – we think this is an issue that will warrant continued re-examination as the data get better and more numerous.

References

Allcott, H, R Diamond, J P Dube, J Handbury, I Rahkovsky and M Schnell (forthcoming). “Food deserts and the causes of nutritional inequality”, Quarterly Journal of Economics.

Carden, A, and C Courtemanche (2016). “The evolution and impact of the general merchandise sector”, in E Basker (ed.), Handbook of the Economics of Retailing and Distribution 413–32, Cheltenham, UK: Edward Elgar.

Coleman-Jensen, A, M Nord and A Singh (2013). “Household food security in the United States in 2012”, ERR-155, US Department of Agriculture, Economic Research Service.

Courtemanche, C, and A Carden (2011). “The impact of Walmart Supercenters on body mass index and obesity”, Journal of Urban Economics 69: 165–81.

Courtemanche, C, A Carden, X Zhou and M Ndirangu (2019), “Do Walmart Supercenters improve food security?”, Applied Economic Perspectives and Policy 41(2): 177–198.

Dube, A, T Lester and B Eidlin (2007). “Firm entry and wages: Impact of Wal-Mart growth on earnings throughout the retail sector”, Working Paper No. 126-05, Institute of Industrial Relations.

Neumark, D, J Zhang and S Ciccarella (2008). “The effects of Wal-Mart on local labor markets”, Journal of Urban Economics 63: 405–30.

US Department of Agriculture Economic Research Service (2018), “Measurement”, USDA.

Volpe, R, A Okrent and E Leibtag (2013). “The effect of Supercenter-format stores on the healthfulness of consumers’ grocery purchases”, American Journal of Agricultural Economics 95: 568–89.

Endnotes

[1] The full list of questions is on pages 32–34 of Courtemanche et al. (2019), provided for free courtesy of the IZA Institute of Labor Economics.

[2] Summarised in “Do ‘food deserts’ explain the nutrition gap? Maybe not, say researchers”, Forbes.com, 21 June 2019.