When Wal-Mart moves into town, is this good or bad? It is commonly perceived that this is bad for local businesses, and especially for small "mom-and-pop" stores. In reality, that depends on whether big-box stores like Wal-Mart are complements or substitutes. Intuitively, they should be largely substitutes with respect to the shops they directly compete with, while there may be complementarities with other shops as they attract more customers to town.
John Haltiwanger, Ron Jarmin and C.J. Krizan confirm this intuition. Surprisingly, this was not a clear result from the previous literature. The difference here is that establishment level data is used, and that employment dynamics within a metropolitan area are studied.
That being said, what is so bad about seeing mom-and-pop stores closing? These are high inefficient retailers, and if similar retailing services can be provided at lower cost, we should go for it. If people value a different retailing experience, they should be willing to pay for it, and visibly they are not. Banning big boxes only provides rents to existing inefficient businesses.
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