Download This PaperSpillovers through Multimarket Firms: The Uniform Product Replacement Channel
45 Pages Posted: 13 Nov 2019 Last revised: 30 Mar 2026
Date Written: November 8, 2019
Abstract
We study how regional housing market disruptions spill over across US local markets through intrafirm spatial networks created by multimarket firms. We identify spillovers by linking granular data on product-county-level prices and quantities with producer-level information and exploiting variation in firms' exposure to differential declines in local house prices. A firm's local sales decrease following a local housing price decline but do so more strongly to indirect exposure to the housing price decline originating in its other markets. The barcode-level data reveal a novel uniform product replacement mechanism behind the spillover: Firms replace higher-value products with lower-value products in response to the housing market disruptions, and such product replacements are synchronized across markets within each firm, including the markets with stable housing prices. These results have new implications for (i) firm-level returns to scale, (ii) intrafirm spillover mechanisms, and (iii) regional household consumption.
Keywords: Network, Spillover, Product Replacement, Great Recession, Housing Crisis
JEL Classification: E20, E32, F44, L11, L22, R32
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