Do large retailers affect employment? Evidence from an emerging economy

This article studies the effect of the emergence of large retailers (hypermarkets and department stores) on employment in the commerce sector in the regions of Chile. We use a panel with quarterly data from 11 Chilean regions for the period 1996 to 2004. Our results indicate that the entry of large retailers produces a discrete increase in employment in the commerce sector in the quarter that the entry occurs. We also find that there is an additional positive effect on employment throughout the year entry occurs, suggesting that suppliers or other parts of the chain of production follow the large retailer into the local market. However, after the first year of the entry there is a partial reversion, suggesting that smaller retailers exit or contract in response to the entry of the large retailer. The net effect on employment of the entry of a large retailer is an increase of 300 jobs.