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Retail globalization and household welfare:evidence from Mexico

Atkin, David and Faber, Benjamin and Gonzalez-Navarro, Marco (2015) Retail globalization and household welfare:evidence from Mexico. CEP Discussion Papers, CEPDP1351. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: CEPDP1351

Abstract

The arrival of global retail chains in developing countries is causing a radical transformation in the way that households source their consumption. This paper draws on a new collection of Mexican microdata to estimate the effect of foreign supermarket entry on household welfare. The richness of the microdata allows us to estimate a general expression for the gains from retail FDI, and to decompose these gains into several distinct channels. We find that foreign retail entry causes large and significant welfare gains for the average household that are mainly driven by a reduction in the cost of living. About one quarter of this price index effect is due to pro-competitive effects on the prices charged by domestic stores, with the remaining three quarters due to the direct consumer gains from shopping at the new foreign stores. We find little evidence of significant changes in average municipality-level incomes or employment. We do, however, find evidence of store exit, adverse effects on domestic store profits and reductions in the incomes of traditional retail sector workers. Finally, we show that the gains from retail FDI are on average positive for all income groups but regressive, and quantify the opposing forces that underlie this finding.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: ©2015 The Authors
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 30 Jun 2015 15:26
Last Modified: 30 Jun 2015 15:26
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/62575

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