How does the entry of large discount stores increase retail employment? Evidence from Korea

The Korean retail sector has undergone significant structural changes in conjunction with the rapid expansion of big-box stores since the mid-1990s. Using county-level data from Korea in 1997-2010, we examine the effects of the entry of large discount stores on local retail employment. Based on a differences-in-differences approach, our analysis shows that the entry of a large discount store leads to an increase of approximately 200 retail jobs in the county. Two thirds of this gain is attributable to the entry of the large store itself, and the other third is a result of the expansion of other retail sectors. In particular, we find that the entry of a large discount store increases employment in non-general merchandise sectors, such as bakeries, clothing stores, and electronics stores. Our finding suggests that the opening of a large discount store may have a spillover effect on the local retail sector, thereby leading to an overall increase in county employment. Such a finding of positive employment effects is in sharp contrast to previous findings on the employment effect of large retail chains, based primarily on the expansion of Wal-Mart in the US. While Wal-Mart competes with incumbent chain stores, large discount stores the first nationwide large-scale chains introduced in Korea may play the role of anchor stores. By providing modern shopping infrastructure and attracting new small stores into neighborhoods, these large discount stores have transformed local retail sectors from traditional shopping environments. Journal of Comparative Economics 43 (3) (2015) 559-574. Department of Economics, Sogang University, Seoul 121-742, Korea. (C) 2015 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.