The Geography of Consumption

46 Pages Posted: 18 Jul 2017

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

J. Bradford Jensen

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy; Peter G. Peterson Institute for International Economics

Ferdinando Monte

Georgetown University - Robert Emmett McDonough School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: July 14, 2017

Abstract

We use detailed information from U.S. consumers' credit card purchases to provide the first large scale description of the geography of consumption. We find that consumers' mobility is quite limited and document significant heterogeneity in the importance of gravity across sectors. We develop a simple model of consumer behavior, emphasizing the role of the durability/storability of products, to organize the main stylized facts. Heterogeneity in the storability of products across sectors generates a positive correlation between the strength of gravity and the frequency of transactions at the sector level; this correlation is a clear feature of the data. Using daily rain precipitation from thousands of weather stations in U.S., we show that shocks to travel costs change the spatial distribution of expenditure, and they do so differentially across sectors: hence, the level and heterogeneity of travel costs' shape the level and elasticity of any merchant's demand. This evidence suggests that incorporating the demand-side is essential to analyzing the distributional consequences of local and aggregate shocks across regions. These results also suggest the demand-side is critical to understanding the location of firms and employment in the large and understudied service sector.

Keywords: Geography, Consumption, Household Finance, Spending, Credit Cards, Consumer Credit, Gravity Model

JEL Classification: R1, R2, F1, F14, L8

Suggested Citation

Agarwal, Sumit and Jensen, J. Bradford and Monte, Ferdinando, The Geography of Consumption (July 14, 2017). Available at SSRN: https://ssrn.com/abstract=3002231 or http://dx.doi.org/10.2139/ssrn.3002231

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

J. Bradford Jensen

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy ( email )

Washington, DC 20057
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Ferdinando Monte (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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