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Essays on Consumer Shopping Behavior over the Business Cycle and Wage Income Smoothing

By Wen Long

Abstract

It consists of two essays. The first essay studies if and how consumers search for low prices (bargains). Using a panel of prices and quantities of consumer purchases measured at the UPC-level, I find that consumers paid lower prices after the Great Recession which is interpreted as an outcome of increased search intensity. There is large heterogeneity among consumers. I categorize consumers, by year, into three types by the degree of search intensity: bargain hunters, average consumers, and inattentive shoppers and find that consumer types are not very persistent. Further,I find that consumers rationally search for lower prices for product categories of which they consume a lot while they search less for lower prices for products they consume less of. I write a simple model of shopping time allocation for two goods which rationalizes that consumers will search more intensively for lower prices on the good on which they spends more. In addition, I find evidence that in the recession consumers pay more shopping trips and visit more stores to search for bargains. In the second essay, Adopting the framework of Asdrubali, Sorensen and Yosha (1996), I identity three channels of wage income smoothing: net taxes, employers, and interstate commuting income. They smooth 1.8%, 55.1% and 3.0%, respectively, of shocks to Gross State Product (GSP). 40.1% of shocks are not smoothed. I split the sample into four non-overlapping time periods and find the shares of net taxes on production and employers change significantly over time. Lastly, I test the asymmetry of wage income smoothing over the business cycle. The responses of wage incomes to GSP shocks exhibit a reversed \rockets and feathers" feature, i.e. wage incomes respond stronger and faster to negative shocks than positive shocks.Economics, Department o

Topics: Risk-sharing, Consumer behavior, Shopping
Year: 2019
OAI identifier: oai:uh-ir.tdl.org:10657/5469

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