“Local Labor Market Effects of Amazon”^

Draft

Does the entry of a large employer to a local labor market increase welfare for residents? To answer this question, I analyze the local effects of the dramatic expansion of Amazon’s fulfillment center (FC) network from 2010 onward. I exploit the staggered roll-out of FCs across large U.S. metros in a difference-in-difference framework. I find Amazon’s entry in a metro increases the total employment rate by 1.0 percentage point and average wages by 0.7 percent. The composition of employment shifts from retail and wholesale trade to warehousing and tradeable services, primarily driven by younger workers. Employment gains are concentrated among non-college workers. Rents increase by 1.1 percent, utility costs increase by 6.0 percent, and home values increase by 5.6 percent. I interpret these results through the lens of a static spatial equilibrium model. I find a net increase in aggregate welfare: the average worker is willing to pay $329 per year (0.8 percent of income) to live in a large city with Amazon. The welfare gains are primarily driven by rising home values; the increase in employment, wages, and sectoral shifts account for only one-tenth of the increase. These positive impacts are partially offset by rising local costs of living and the declining value of non-wage amenities in large cities. Government subsidies have a negligible effect on welfare as they are a small share of state and local budgets.

^ Awards: 2023 North American Regional Science Council (NARSC) Graduate Student Author Competition

Media: Marginal Revolution