Trading Down and the Business Cycle / Nir Jaimovich, Sergio Rebelo, Arlene Wong.

Format:

Book

Author/Creator:

Jaimovich, Nir.

Contributor:

National Bureau of Economic Research.

Rebelo, Sergio.

Wong, Arlene.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21539.

NBER working paper series no. w21539

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We document two facts. First, during the Great Recession, consumers traded down in the quality of the goods and services they consumed. Second, the production of low-quality goods is less labor intensive than that of high-quality goods. When households traded down, labor demand fell, increasing the severity of the recession. We find that the trading-down phenomenon accounts for a substantial fraction of the fall in U.S. employment in the recent recession. We show that embedding quality choice in a business-cycle model improves the model's amplification and comovement properties.

Notes:

Print version record

September 2015.