Do Households' Budget Allocations Vary with Economic Factors? Evidence from Nielsen Data
81 Pages Posted: 7 Jan 2020 Last revised: 16 Oct 2021
Date Written: December 16, 2019
How do households' joint budget allocations across different store types (grocery vs. discount vs. warehouse vs other stores), category types (food vs. non food) and brand types (private label vs. national brand) change with changes to their income, wealth, employment status, household size and macro factors like the recession? We answer this question using consumer packaged goods (CPG) purchases from more than 1000 categories by a representative panel of US households over fourteen years. We measure within household effects on expenditure shares of joint bivariate (e.g., grocery-food) and trivariate (e.g. grocery-food-private label) baskets along with their effects on univariate baskets. We demonstrate that such an analysis is important for nuanced responses to changes in economic conditions by managers across the different combinations of store formats, product categories and brand types. For example, managers of national brands looking at univariate baskets would conclude that an increase in income is good for their businesses: we find that this would be true for a non-food but not for a food product. We also demonstrate that approximating the joint budget allocation shares or the effects of economic variables on joint budget allocations using separate analyses of store-, category- and brand-type expenditure shares along with an assumption that these decisions are made independently by consumers, can result in incorrect inferences regarding joint baskets.
Keywords: Income and wealth effects; business cycles and consumer expenditures; store, category and brand expenditure shares; consumer packaged goods
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