Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data
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.
We would like to thank Mary Amiti, Costas Arkolakis, David Atkin, Kirill Borusyak, Pablo Fajgelbaum, Cecile Gaubert, Jessie Handbury, James Harrigan, Xavier Jaravel, Thierry Mayer, Volker Nocke, Steve Redding, Andres Rodriguez-Clare, Nicolas Schultz, Eric Verhoogen, Jonathan Vogel and participants at multiple seminars and conferences for helpful comments and discussions. Dmitri Koustas and May-Lyn Cheah provided outstanding research assistance. The analysis is based on data from The Nielsen Company (US), LLC and marketing databases provided by the Kilts Center for Marketing Data Center at The University of Chicago Booth School of Business. The conclusions drawn from the Nielsen data are those of the researchers and do not reflect the views of Nielsen, nor of the National Bureau of Economic Research. Nielsen is not responsible for, had no role in, and was not involved in analyzing and preparing the results reported herein.
Benjamin Faber & Thibault Fally, 2022. "Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data," The Review of Economic Studies, vol 89(3), pages 1420-1459.