Counting the True Costs

Supporting some of the claims made in the piece below by Clifford F. Thies about Wal-Mart's benefit to consumers is a recent scientific paper by Jerry A. Hausman of the Massachusetts Institute of Technology (MIT) Department of Economics and the National Bureau of Economic Research (NBER) and Ephraim Leibtag of the U.S. Department of Agriculture (USDA) Economic Research Service - Food and Rural Economics Division. The paper is titled "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart". Hausman and Leibtag conclude:

We...find the average estimate to be 20.2% of average food expenditure. We similarly estimate the exact compensating variation from the indirect price effect that arises from the increased competition that supercenters create. We find this average effect to be 4.8%. Thus, we estimate the average effect of the total the compensating variation to be 25% of food expenditure, a sizeable estimate.

Since we find that lower income households tend to shop more at these low priced outlets and their compensating variation is higher from supercenters than higher income households, a significant decrease in consumer surplus arises from zoning regulations and pressure group tactics that restrict the entry and expansion of supercenters into particular geographic markets.

So in other words, in addition to the PARD/UFCW appeals costing the city hundreds of thousands of dollars in fees and lost tax revenues, they are also adding 25% to the food expenditures of every family in Pullman and hurting lower income households.

To whom shall we address the bill, PARDners?

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