Marco Gonzalez-Navarro's Research on Retail Globalization Appears in the JPE

March 23, 2018

ARE Assistant Professor Marco Gonzalez-Navarro’s paper on the impact of foreign retail chains’ entry into developing countries has been selected as the lead article in the latest issue of the Journal of Political Economy. The paper is co-authored with David Akin of MIT and Ben Faber of UC Berkeley.

In the last two decades, many developing countries liberalized their retail sector to allow the entry of foreign retail chains while other countries took the opposite route. We can now determine the welfare effects of allowing foreign retailer entry using the Mexican experience, which shows substantial gains to households, and use this research to inform policymakers worldwide of its potential benefits.

The arrival of big-box retailers from developed countries has transformed the way Mexican households shop for goods, sparking a “supermarket revolution”. Traditionally, consumers in developing countries have shopped at street markets and small independent stores. However, consumers have increasingly switched to shopping at foreign retailers, who offer a larger variety of products at cheaper prices. Despite concerns that foreign retailers might adversely affect local employment and household incomes, our evidence shows that allowing them to operate their businesses in Mexico has generated substantial welfare gains for households across the income spectrum by lowering the cost of living, while having limited impacts on total employment, incomes, and local businesses closing.  

David Atkin, Benjamin Faber, and Marco Gonzalez-Navarro (2018) “Retail Globalization and Household Welfare: Evidence from Mexico” Journal of Political Economy, Vol. 126, Num. 1, February, pp. 1-73.