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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Benjamin Faber

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May 2015Retail Globalization and Household Welfare: Evidence from Mexico
with David Atkin, Marco Gonzalez-Navarro: w21176
The arrival of global retail chains in developing countries is causing a radical transformation in the way that households source their consumption. This paper draws on a new collection of Mexican microdata to estimate the effect of foreign supermarket entry on household welfare. The richness of the microdata allows us to estimate a general expression for the gains from retail FDI, and to decompose these gains into several distinct channels. We find that foreign retail entry causes large and significant welfare gains for the average household that are mainly driven by a reduction in the cost of living. About one quarter of this price index effect is due to pro-competitive effects on the prices charged by domestic stores, with the remaining three quarters due to the direct consumer gains ...

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