Spillovers through Multimarket Firms: The Uniform Product Replacement Channel

50 Pages Posted: 13 Nov 2019 Last revised: 10 Jul 2022

See all articles by Jay Hyun

Jay Hyun

HEC Montréal

Ryan Kim

Johns Hopkins University

Date Written: November 8, 2019

Abstract

We study how regional shocks 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 direct negative local demand shock but do so more strongly to indirect negative demand shocks originating in its other markets. Our barcode-level data and multiregion model with endogenous product quality adjustment reveal a novel uniform product replacement mechanism behind the spillover.

Keywords: Network, Spillover, Product Replacement, the Great Recession, House Prices

JEL Classification: E20, E32, F44, L11, L22, R32

Suggested Citation

Hyun, Jay and Kim, Ryan, Spillovers through Multimarket Firms: The Uniform Product Replacement Channel (November 8, 2019). Available at SSRN: https://ssrn.com/abstract=3480961 or http://dx.doi.org/10.2139/ssrn.3480961

Jay Hyun (Contact Author)

HEC Montréal ( email )

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HOME PAGE: http://https://sites.google.com/site/jungsikhyunecon

Ryan Kim

Johns Hopkins University ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

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