Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data / Benjamin Faber, Thibault Fally.

Format:

Book

Author/Creator:

Faber, Benjamin.

Contributor:

National Bureau of Economic Research.

Fally, Thibault.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23101.

NBER working paper series no. w23101

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Firm Heterogeneity in Consumption Baskets

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

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.

Notes:

Print version record

January 2017.