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Income and Wealth Effects on Private-Label Demand: Evidence From the Great Recession

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Listed:
  • Jean-Pierre Dubé
  • Günter J. Hitsch
  • Peter E. Rossi

Abstract

We measure the causal effects of income and wealth on the demand for private-label products. Prior research suggests that these effects are large and, in particular, that private-label demand rises during recessions. Our empirical analysis is based on a comprehensive household-level transactions database matched with price information from store-level scanner data and wealth data based on local house value indices. The Great Recession provides a key source of the variation in our data, with a large and geographically diverse impact on household incomes over time. We estimate income and wealth effects using “within” variation of income and wealth at the household level. Our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization. We establish a precisely measured negative effect of income on private-label shares. The effect of wealth is negative but not precisely measured. However, the estimated effect sizes are small, in contrast with prior academic work and industry views. An examination of the possible supply-side response to the recession shows only small changes in the relative price of national-brand and private-label products. Our estimates also reveal a large positive trend in private-label shares that predates the Great Recession. We examine some possible factors underlying this trend, but find no evidence that this trend is systematically related to specific private-label quality tiers or to the overall rate of private-label versus national-brand product introductions.

Suggested Citation

  • Jean-Pierre Dubé & Günter J. Hitsch & Peter E. Rossi, 2015. "Income and Wealth Effects on Private-Label Demand: Evidence From the Great Recession," NBER Working Papers 21446, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21446
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    References listed on IDEAS

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    Cited by:

    1. Zare, Samane & Sayed, Saghaian, 2018. "Recession and Income Effect on the Private Label Products Demand: A Case Study of Fluid Milk," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266695, Southern Agricultural Economics Association.
    2. Marta Arce-Urriza & Javier Cebollada, 2018. "Assesing the success of private labels online: differences across categories in the grocery industry," Electronic Commerce Research, Springer, vol. 18(4), pages 719-753, December.
    3. White, Susan & Tregjo-Pech, Carlos & Noguera, Magdy, 2018. "ConAgra Foods: valuing a potential recipe for success," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(5).

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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • L0 - Industrial Organization - - General
    • L00 - Industrial Organization - - General - - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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