“The Local Economic Impacts of Amazon: Evidence from From Fulfillment Centers and Lessons for Local Economic Development"”

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Does the entry of a large employer to a local labor market increase welfare for residents? What are the implications for local economic development policy? To answer these questions, this dissertation conducts the first, comprehensive analysis of the dramatic expansion of Amazon’s fulfillment center (FC) network from 2010 onward. In Chapter 1, I exploit the staggered roll-out of FCs across large U.S. metros in a difference-in-difference framework. I find Amazon’s entry to a new metro increases the total employment rate by 1.0 percentage points and average wages by 0.7 percent. The industrial 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. Local rents increase by 1.1 percent, utility costs by 6.0 percent, and home values by 5.6 percent. In Chapter 2, I present a detailed spatial equilibrium model of the U.S. economy. My model is an extension of the classic urban economics models of Rosen (1979) and Roback (1982), combined with elements of modern quantitative spatial equilibrium models, such as Kline and Moretti (2014) and Redding and Rossi-Hansberg (2017). It incorporates worker heterogeneity in education and home ownership, productivity spillovers across sectors, local government financed public goods, and unobserved non-wage amenities. The model yields welfare expressions that transparently map the impact of eight distinct channels, all of which have been shown to be empirically important for the welfare incidence of local labor demand shocks. These channels include: (1) direct employment effects, (2) cross-sector spillovers, (3) local cost of living, (4) average home values, (5) local public goods, (6) corporate subsidies, (7) non-wage amenities, and (8) migration. In the third and final chapter, I calibrate my spatial equilibrium model to the U.S. economy before and after Amazon’s expansion. I estimate welfare effects in the aggregate and by education and home ownership status. I find a net increase in welfare: the average worker is willing to pay $329 per year (0.8 percent of income) to live in a large U.S. city after Amazon’s entry. The welfare gains are primarily driven by rising home values; the increase in employment, wages, and benefits of the sectoral shifts are partially offset by rising costs of living and a declining average value of non-wage amenities in large cities. Corporate subsidies have a negligible impact on welfare as they are a small share of state and local budgets. I conclude with recommendations for state and local leaders when evaluating local economic development policies.

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

Media: CBC, Marginal Revolution, Reason Magazine