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

109 Pages Posted: 18 May 2018

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: April 1, 2018

Abstract

A growing literature has documented the role of rm heterogeneity within sectors in accounting 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 fi rm size distribution within disaggregated product groups. We use the microdata 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 nd that larger, more productive rms endogenously sort into catering to the taste of wealthier households, and that this gives rise to asymmetric effects on household price indices. These effects matter for real income inequality. We and that they amplify observed changes in nominal inequality over time, lead to a more regressive distribution of the gains from international trade, and give rise to new distributional implications of business regulations.

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

JEL Classification: F15, F61, E31

Suggested Citation

Faber, Benjamin and Fally, Thibault, Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data (April 1, 2018). Available at SSRN: https://ssrn.com/abstract=3173774 or http://dx.doi.org/10.2139/ssrn.3173774

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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