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- Title
Income Fluctuations and Firm Choice.
- Authors
Baker, Scott R.; Baugh, Brian; Kueng, Lorenz
- Abstract
How households shift spending across firms in response to income fluctuations is an important source of firm risk. Using transaction-level data, we study how households interact with the universe of retailers following income changes. We find that income increases within and across households result in substitution toward retailers in a category that are higher quality; smaller; more profitable; and have higher labor intensity, research and development (R&D) intensity, and equity betas. Although 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.
- Subjects
INCOME; HOUSEHOLDS &; economics; RETAIL industry; RESEARCH &; development; EQUITY (Law); MACROECONOMICS; PROFITABILITY
- Publication
Journal of Financial & Quantitative Analysis, 2021, Vol 56, Issue 6, p2208
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S0022109020000526