Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data

110 Pages Posted: 15 Aug 2017 Last revised: 27 Jan 2020

See all articles by Benjamin Faber

Benjamin Faber

University of California, Berkeley - Department of Economics

Thibault Fally

UC Berkeley - ARE Department

Multiple version iconThere are 3 versions of this paper

Date Written: August 2017

Abstract

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.

Keywords: Firm Heterogeneity, household price indices, real income inequality, scanner data

JEL Classification: E31, F15, F61

Suggested Citation

Faber, Benjamin and Fally, Thibault, Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data (August 2017). CEPR Discussion Paper No. DP12209, Available at SSRN: https://ssrn.com/abstract=3018460

Benjamin Faber (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

Thibault Fally

UC Berkeley - ARE Department ( email )

Berkeley, CA 94720
United States

HOME PAGE: http://are.berkeley.edu/~fally/

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