Unemployment shocks, cyclical prices and shopping behavior

Thor Andreas Aursland and Frode Steen

No 3/2021, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We use rich data from Norway’s biggest grocery chain to show how households and grocery stores react to changing economic conditions. We exploit the regional nature of a recession following the drop in the oil price in 2014 and find that when the local unemployment rate increases, households shift toward cheaper stores, and toward bulk and private label products. Households also buy more on sale and the average store level prices decreases. We then derive a novel decomposition of the changes in the prices households pay for products a in large number of product categories. The decomposition allows us to measure the relative importance of the different sources of price cyclicality. We find that a significant part of the cyclicality is explained by grocery stores responding to economic downturns by lowering their prices. Still, changes in household behavior are the main driver of price cyclicality, primarily through increased willingness to take advantage of sales.

Keywords: cyclical; prices (search for similar items in EconPapers)
JEL-codes: D00 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2021-01-26
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hdl.handle.net/11250/2724777 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhheco:2021_003

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Karen Reed-Larsen ().