Income and Wealth Effects on Private-Label Demand: Evidence from the Great Recession

Chicago Booth Research Paper No. 15-18

Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 2-036

63 Pages Posted: 17 Jul 2015  

Jean-Pierre Dubé

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Günter J. Hitsch

University of Chicago - Booth School of Business

Peter E. Rossi

University of California, Los Angeles (UCLA) - Anderson School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: June 1, 2015

Abstract

We measure the causal effects of income and wealth on the demand for private-label products. Prior research suggests that these effects are large and, in particular, that private-label demand rises during recessions. Our empirical analysis is based on a comprehensive household-level transactions database matched with price information from store-level scanner data and wealth data based on local house value indices. The Great Recession provides a key source of the variation in our data, with a large and geographically diverse impact on household incomes over time. We estimate income and wealth effects using “within” variation of income and wealth at the household level. Our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization. We establish a precisely measured negative effect of income on private-label shares. The effect of wealth is negative but not precisely measured. However, the estimated effect sizes are small, in contrast with prior academic work and industry views. An examination of the possible supply-side response to the recession shows only small changes in the relative price of national-brand and private-label products. Our estimates also reveal a large positive trend in private-label shares that predates the Great Recession. We examine some possible factors underlying this trend, but find no evidence that this trend is systematically related to specific private-label quality tiers or to the overall rate of private-label versus national-brand product introductions.

Suggested Citation

Dubé, Jean-Pierre and Hitsch, Günter J. and Rossi , Peter E., Income and Wealth Effects on Private-Label Demand: Evidence from the Great Recession (June 1, 2015). Chicago Booth Research Paper No. 15-18. Available at SSRN: https://ssrn.com/abstract=2631768 or http://dx.doi.org/10.2139/ssrn.2631768

Jean-Pierre H. Dube (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://gsb.uchicago.edu/fac/jean-pierre.dube

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gunter J. Hitsch

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Peter E. Rossi

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
773-294-8616 (Phone)

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