The Extensive Margin of Aggregate Consumption Demand

Claudio Michelacci, Luigi Paciello () and Andrea Pozzi
Additional contact information
Claudio Michelacci: EIEF and CEPR
Andrea Pozzi: EIEF and CEPR

No 1906, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: About half of the cyclical change in US non-durable consumption expenditure is due to changes in the products entering households’ consumption basket (the extensive margin). Changes in the basket depend mostly on fluctuations in the rate at which households add new products; removals are relatively acyclical. These patterns are largely explained by the fact that households respond to income increases by adopting new product varieties in their consumption basket. Fluctuations in household adoption are a prominent determinant of the aggregate demand for new products and amplify the long-run welfare effects of aggregate shocks.

Pages: 87
Date: 2019, Revised 2019-04
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The Extensive Margin of Aggregate Consumption Demand (2019)
Working Paper: The extensive margin of aggregate consumption demand (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eie:wpaper:1906

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