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The Geography of Consumption

Author

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  • Agarwal, Sumit
  • Jensen, J Bradford
  • Monte, Ferdinando

Abstract

We use detailed information from U.S. consumers' credit card purchases to provide the first large-scale description of the geography of consumption. We find that consumers' mobility is quite limited and document significant heterogeneity in the importance of gravity across sectors. We develop a simple model of consumer behavior, emphasizing the role of the durability/storability of products, to organize the main stylized facts. Heterogeneity in the storability of products across sectors generates a positive correlation between the strength of gravity and the frequency of transactions at the sector level; this correlation is a clear feature of the data. Using daily rain precipitation from thousands of weather stations in U.S., we show that shocks to travel costs change the spatial distribution of expenditure, and they do so differentially across sectors: hence, the level and heterogeneity of travel costs' shape the level and elasticity of any merchant's demand. This evidence suggests that incorporating the demand-side is essential to analyzing the distributional consequences of local and aggregate shocks across regions. These results also suggest the demand-side is critical to understanding the location of firms and employment in the large and understudied service sector.

Suggested Citation

  • Agarwal, Sumit & Jensen, J Bradford & Monte, Ferdinando, 2017. "The Geography of Consumption," CEPR Discussion Papers 12150, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12150
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    References listed on IDEAS

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    Cited by:

    1. Erich Battistin & Lorenzo Neri, 2017. "School Performance, Score Inflation and Economic Geography," Working Papers 837, Queen Mary University of London, School of Economics and Finance.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L8 - Industrial Organization - - Industry Studies: Services
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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