Citation

Discussion Paper Details

Please find the details for DP12209 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data

Author(s): Benjamin Faber and Thibault Fally

Publication Date: August 2017

Keyword(s): Firm Heterogeneity, household price indices, real income inequality and scanner data

Programme Area(s): International Trade and Regional Economics

Abstract: A growing literature has documented the role of firm heterogeneity within sectors for nominal income inequality. This paper explores the implications for household price indices across the income distribution. Using detailed matched US home and store scanner microdata, we present evidence that rich and poor households source their consumption from different parts of the firm size distribution within disaggregated product groups. We use the data to examine alternative explanations, propose a tractable quantitative model with two-sided heterogeneity that rationalizes the observed moments, and calibrate it to explore general-equilibrium counterfactuals. We find that larger, more productive firms endogenously sort into catering to the taste of richer households, and that this gives rise to asymmetric effects on household price indices. We quantify these effects in the context of policy counterfactuals that affect the distribution of disposable incomes on the demand side or profits across firms on the supply side.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12209

Bibliographic Reference

Faber, B and Fally, T. 2017. 'Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12209