The Geography of Consumption

Sumit Agarwal (), J. Jensen () and Ferdinando Monte
Additional contact information
Sumit Agarwal: Georgetown University

No 2017-062, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: We use detailed information from U.S. consumers' credit card purchases to provide the first large- scale description of the geography of consumption. We find that consumers' mobility is quite limited and document significant heterogeneity in the importance of gravity across sectors. We develop a simple model of consumer behavior, emphasizing the role of the durability/storability of products, to organize the main stylized facts. Heterogeneity in the storability of products across sectors generates a positive correlation between the strength of gravity and the frequency of transactions at the sector level; this correlation is a clear feature of the data. Using daily rain precipitation from thousands of weather stations in U.S., we show that shocks to travel costs change the spatial distribution of expenditure, and they do so differentially across sectors: hence, the level and heterogeneity of travel costs shape the level and elasticity of any merchant's demand. This evidence suggests that incorporating the demand-side is essential to analyzing the distributional consequences of local and aggregate shocks across regions. These results also suggest the demand-side is critical to understanding the location of firms and employment in the large and understudied service sector.

Keywords: consumer demand; geographic mobility; spatial distribution of expenditures (search for similar items in EconPapers)
JEL-codes: F10 F14 L80 R10 R20 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-geo and nep-ure
Note: MIP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Agarwa ... aphy-consumption.pdf First version, July 14, 2017 (application/pdf)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Agarwa ... sumption_revised.pdf Second version, May 29, 2018 (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:hka:wpaper:2017-062

Access Statistics for this paper

More papers in Working Papers from Human Capital and Economic Opportunity Working Group Contact information at EDIRC.
Bibliographic data for series maintained by Jennifer Pachon ().