Amer. J. Agric. Econ. 88, 5 (2006):1304-1310, in press. Page 1
Copyright 2006 American Agricultural Economics Association
Wal-Mart and Social Capital
Stephan J. Goetz and Anil Rupasingha
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Economists increasingly recognize that markets exist within social and cultural contexts,
and that these contexts affect how resources are allocated to competing ends. The social
economics literature views individuals as both affected by and affecting the environment in
which they live (e.g., Barrett 2005; Durlauf and Young 2001). Contributors to this literature recognize that utility and happiness are relative concepts that depend on levels
achieved by peers (Layard 2005), and acknowledge that both utility and happiness can increase with levels of social interaction (Kahneman and Krueger 2006). Further, “because
social organization is typically characterized by multiple equilibria, small changes in economic conditions can lead to dramatic changes in the behavior of and membership in [social] groups and networks” (Barrett 2005, p.10).
A far-reaching economic change is the recent rise of big-box retailing, led by Wal-Mart
Corp. (Fishman 2006). While the chain’s adverse impact on mom-and-pop type retail outlets has been well-documented (Stone 1997, Irwin and Clark 2006), the second-round effects of such store closings on local social capital or civic capacity have not been studied.
For example, economic developers lament the fact that community civic capacity declines
when locally-owned banks go out of business or are taken over by national corporations.
Yet systematic evaluation of this phenomenon has remained elusive, because of the difficulty of measuring local social capital.
Advances in the consistent measurement of county-level social capital (Rupasingha,
Goetz and Freshwater 2006) now make it possible to examine rigorously the impact of bigbox chains on the civic capacity of all rural and urban US counties. Previous studies have
implemented the concept using trust, social norms or networks, following Putnam’s (2000)
seminal work, Bowling Alone. These studies use cross-country comparisons based on individual-level data (the World Value Surveys, Knack and Keefer 1997), state-level data in the
U.S., (the General Social Survey, Glaeser, Laibson and Sacerdote 2002) or data collected in
individual-level surveys in specific contexts (Narayan and Prichett 1999).
In this article, we identify for the first time the independent effect of Wal-Mart stores
on social capital at the U.S. county-level during the 1990s. We propose a conceptual model
of the processes leading to changes in social capital and hypothesize that big-box corporations, in which innovative business processes and management functions are handled out of
centralized headquarters, or outsourced to Asia, depress social capital stocks in local communities. This compounds the adverse effects of losing local philanthropic capacity, reinvestment of surpluses (rents) and community-specific knowledge or capital.
Questions surrounding social capital are hardly trivial for economists. That social capital stocks matter for economic growth and poverty reduction is documented in an expanding literature (Knack and Keefer 1997, Rupasingha, Goetz and Freshwater 2002, Rupasin-
