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Investigating Income Effects in Scanner Data: Do Gasoline Prices Affect Grocery Purchases?

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Dora Gicheva, Assistant Professor (Creator)
Institution
The University of North Carolina at Greensboro (UNCG )
Web Site: http://library.uncg.edu/

Abstract: There is much discussion in the popular press about how consumers adjust their purchase decisions for items from lattes and restaurant meals to which type of meat to purchase for dinner during times of rising fuel prices.1 While analysts ascribe declines in retail sector profits when fuel prices rise to changes in demand elasticity, most empirical analysis of consumer choice for such daily items abstracts from inter- temporal income effects. Instead, fuel prices are used in demand estimation as exogenous shifters of production costs, and therefore valid instruments for identifying demand parameters. Though introspection and popular press suggest that sharp changes in fuel costs may shift price sensitivity in nonfuel purchases through an income effect, little empirical work has been done to estimate or quantify this effect.2

Additional Information

Publication
American Economic Review Papers and Proceedings, May 2010, 480–84.
Language: English
Date: 2010
Keywords
Economics, Consumer choices, Gas prices, Consumer spending, Fuel price, Economic impact