Dollar store impact on local labor markets and retail activity

Abstract

This study examines the relationship between dollar store expansion and local labor market outcomes, including employment, earnings, and retail establishment counts within the general merchandise and food and beverage sectors. We compare these relationships across urban and rural counties. Using an instrumental variables approach to address potential endogeneity in store location decisions, we find that dollar store presence corresponds with higher employment levels within the general merchandise retail sector. While absolute employment increases are larger in urban counties, the relative changes compared to baseline employment levels are more substantial in rural counties than urban ones (11.86% versus 5.22%). We find contemporaneous decreases in average weekly earnings, but lagged results show a positive, compensating association with dollar store expansion in urban areas, while rural wages show no significant changes. We find modest employment increases in the food and beverage sector in urban areas with no significant relationship in rural areas. These findings provide empirical evidence that dollar store expansion corresponds with job creation, particularly in the general merchandise retail sector, despite the displacement of existing establishments.