How do U.S. households change their expenditure patterns in response to income or wealth shocks? Insights from NielsenIQ Data

Shirsho Biswas (), Pradeep Chintagunta and Sanjay Dhar ()
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Shirsho Biswas: University of Washington - Foster School of Business
Sanjay Dhar: University of Chicago Booth School of Business

Quantitative Marketing and Economics (QME), 2025, vol. 23, issue 3, No 3, 419-445

Abstract: Abstract We measure the causal effects of within-household, over time, changes in household income and wealth on several household spending decisions - overall spending, CPG vs. non-CPG spending, and CPG spending across different store types, brand types, and their combinations - using a comprehensive, long-term, and representative panel of U.S. households. We compare the baseline allocations of household expenditures prior to the economic shock with the allocations of the incremental (reduced) household expenditure dollars due to the shock. Since brand managers and retail category managers make decisions based on the flow of consumer spending, we use this to derive managerial implications. We find that, compared to baseline allocations, households allocate their incremental household expenditures due to an increase in income to (a) non-CPG versus CPG categories; (b) warehouse clubs and discount stores versus grocery stores; and (c) national brands versus private labels. National brands account for a larger portion of the loss in grocery store allocation of incremental household expenditures which benefits warehouse clubs more than discount stores. Also, discount stores benefit more than warehouse clubs from the reallocation of private label spending away from grocery stores. Our results are robust across households with different levels of income but differ in magnitude across income groups.

Keywords: Expenditure allocation; Store format; Brand type; Income effect; Wealth effect (search for similar items in EconPapers)
JEL-codes: D12 D15 E21 E32 M30 N32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11129-025-09297-4

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