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Consumption Inequality and the Frequency of Purchases

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  • Olivier Coibion
  • Yuriy Gorodnichenko
  • Dmitri Koustas

Abstract

We document a decline in the frequency of shopping trips in the United States since 1980 and consider its implications for the measurement of consumption inequality. A decline in shopping frequency as households stock up on storable goods (i.e., inventory behavior) will lead to a rise in expenditure inequality when the latter is measured at high frequency, even when underlying consumption inequality is unchanged. We find that most of the recently documented rise in expenditure inequality in the United States since the 1980s can be accounted for by this phenomenon. Using detailed micro data on spending, which we link to data on club/warehouse store openings, we directly attribute much of the reduced frequency of shopping trips to the rise in club/warehouse stores.

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  • Olivier Coibion & Yuriy Gorodnichenko & Dmitri Koustas, 2021. "Consumption Inequality and the Frequency of Purchases," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 449-482, October.
    • Handle: RePEc:aea:aejmac:v:13:y:2021:i:4:p:449-82
    DOI: 10.1257/mac.20190115
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    Cited by:

    1. Olivier Coibion & Dimitris Georgarakos & Yuriy Gorodnichenko & Maarten van Rooij, 2023. "How Does Consumption Respond to News about Inflation? Field Evidence from a Randomized Control Trial," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(3), pages 109-152, July.
    2. Patrizio Tirelli & Maria Ferrara, 2020. "Disinflation, Inequality, And Welfare In A Tank Model," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1297-1313, July.
    3. Renzo Vidal Caycho, 2020. "¿La desigualdad de los agentes afecta al consumo? Una visión desde la política monetaria," Revista de Análisis Económico y Financiero, Universidad de San Martín de Porres, vol. 2(01), pages 07-24.
    4. Battistin, Erich & De Nadai, Michele & Krishnan, Nandini, 2020. "The Insights and Illusions of Consumption Measurements," IZA Discussion Papers 13222, Institute of Labor Economics (IZA).
    5. Rodríguez Mora, José V & Buda, Gergely & Carvalho, Vasco & Hansen, Stephen & Ortiz, Alvaro & Rodrigo, Tomasa, 2022. "National Accounts in a World of Naturally Occurring Data: A Proof of Concept for Consumption," CEPR Discussion Papers 17519, C.E.P.R. Discussion Papers.
    6. Michael Weber & Yuriy Gorodnichenko & Olivier Coibion, 2023. "The Expected, Perceived, and Realized Inflation of US Households Before and During the COVID19 Pandemic," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 326-368, March.
    7. Battistin, Erich & Neri, Lorenzo, 2017. "School Performance, Score Inflation and Economic Geography," IZA Discussion Papers 11161, Institute of Labor Economics (IZA).
    8. Coibion, Olivier & Gorodnichenko, Yuriy & Kueng, Lorenz & Silvia, John, 2017. "Innocent Bystanders? Monetary policy and inequality," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 70-89.
    9. Agarwal, Sumit & Chua, Yeow Hwee & Song, Changcheng, 2022. "Inflation expectations of households and the upgrading channel," Journal of Monetary Economics, Elsevier, vol. 128(C), pages 124-138.
    10. Naubert, Christopher, 2019. "Monetary Policy and Redistribution: A Look under the Hatch with TANK," CEPR Discussion Papers 14159, C.E.P.R. Discussion Papers.
    11. Brent Neiman & Joseph Vavra, 2018. "The Rise in Household Spending Concentration," 2018 Meeting Papers 329, Society for Economic Dynamics.
    12. Ch.-M. CHEVALIER, 2018. "Consumption inequality in France between 1995 and 2011," Documents de Travail de l'Insee - INSEE Working Papers g2018-07, Institut National de la Statistique et des Etudes Economiques.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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