Right Place, Right Time: The Impact of Warehousing Incentives on Local Economies

Economic development policy seeks to attract job-creating companies with the expectation of positive impacts for local workers. However, major warehousing investments in rural counties had no significant impact on wages or unemployment rates. A Comparative Interrupted Time Series (CITS) design exploits a novel quasi-natural experiment—a set of large distribution centers built between 2002 and 2007 by major U.S. retailers. For these warehouses, location choice is exogenous to local policies or economic conditions given that companies are constrained by transportation costs to a narrow spatial window, avoiding reverse causation bias that is common in the literature. A hand-selected sample of 31 counties with large warehouses built by Target, Lowe’s, and Walmart in the mid-2000s are compared to a matched set of counterfactuals. Despite large investments that brought hundreds of jobs, there were few benefits for local workers. Unemployment rates were reduced only temporarily and there was no observed impact on annual average wages. Demand for labor was satisfied through shifting commuting patterns and migration in the short-term and medium term. These results have implications for policymakers who use business attraction policies to promote worker welfare.