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Income Inequality and Product Variety: Empirical Evidence

Dieter Pennerstorfer (), Nora Schindler (), Christoph Weiss () and Biliana Yontcheva ()
Additional contact information
Nora Schindler: WU Wien, https://www.wu.ac.at/vw4/ma/nora-schindler-msc
Biliana Yontcheva: Düsseldorf Institute for Competition Economics, https://sites.google.com/view/biliana-yontcheva/

No 2020-17, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: This article investigates the relationship between income inequality and firms’ locations and product choices. Using detailed information on income at a regionally disaggregated level and individual data on Austrian restaurants, we demonstrate that firm conduct crucially depends on the distribution (in addition to the level) of income. Local markets with higher income inequality are characterized by a larger number of firms, offering a broader range of products and product variants that are on average less common. These findings indicate that local demand is substantially influenced by the heterogeneity in consumers’ income endowments, resulting in large differences in product variety.

Keywords: income inequality; product variety; product differentiation; firm conduct; restaurants (search for similar items in EconPapers)
JEL-codes: L22 D31 R12 L83 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-geo, nep-ind and nep-ore
Note: English
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