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Income Fluctuations and Firm Choice

Scott Baker (), Brian Baugh and Lorenz Kueng
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Brian Baugh: University of Nebraska at Lincoln

No 20-29, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: How households shift spending across firms in response to income fluctuations is an important source of risk to individual firms. Using transaction-level data, we study how households interact with the universe of retailers following changes in income. We find that increases in income, both within and across households, result in substitution towards retailers in a category that are higher quality, smaller, more profitable, and have higher labor intensity, R&D intensity, and equity betas. While not all shifts are economically large, they do not average out across retailers. Thus, retailer choice has implications for key financial and macroeconomic outcomes such as aggregate profitability and labor demand.

Keywords: choice; retailer substitution; customer base; transactional data (search for similar items in EconPapers)
JEL-codes: D10 D22 L11 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-04
New Economics Papers: this item is included in nep-gen and nep-upt
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Handle: RePEc:chf:rpseri:rp2029