The Unequal Gains from Product Innovations

Xavier Jaravel

No 437, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: This paper shows that product innovations disproportionately benefit high-income households due to increasing inequality and the endogenous response of supply to market size. Using detailed product-level data in the retail sector in the United States, the paper shows that from 2004 to 2013 annualized quality-adjusted inflation has been 0.65 percentage points lower for high-income households, relative to low-income households. Using national and local changes in market size driven by demographic trends plausibly exogenous to supply factors, the paper then provides causal evidence that a shock to the relative demand for goods (1) affects the direction of product innovations, and (2) leads to a decrease in the relative price of the good for which demand became relatively larger (i.e. the long-term supply curve is downward sloping). A calibration shows that this effect is sufficiently strong to explain most of the observed difference in quality-adjusted inflation rates across the income distribution.

Date: 2016
New Economics Papers: this item is included in nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2016/paper_437.pdf (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:red:sed016:437

Access Statistics for this paper

More papers in 2016 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().