cost of living inequality during the great recession using detailed barcode level data we construct income group specific price indices for the period of 2004 to 2010 we find substantial differences across income groups arising mainly during the great recession the annual cost of living inflation of the highest quartile has been on average 0 7 percentage points lower than that of the lowest quartile of the income distribution the difference can be explained by the way consumers adjusted their shopping behavior to mitigate the crisis we find that product quality substitution a margin mostly available to richer households is the main mechanism explaining the differences in cost of living inflation our evidence suggests that not accounting for these differences during economic downturns could lead to significant biases in the calculation of inequality and poverty measures jel classifications d12 e31 e32 we thank fernando alvarez erik hurst anil kashyap robert lucas and joseph vavra for their advice and support the paper benefited from comments and suggestions by many others including bong geun choi jorge l garcia jessie handbury sara moreira roberto robatto adriaan ten kate yike wang chen yeh and seminar participants at the university of chicago iea meeting washington university graduate student conference and the midwest macro meeting contacts david argente dargente uchicago edu munseob lee munseob uchicago edu

buying less but shopping more the use of nonmarket labor during a crisis households allocating time between market and non market uses should respond to income variations by adjusting the time devoted to shopping search and other home production activities in this paper we exploit high frequency household expenditure data to examine the use of changes in shopping intensity as a method of mitigating the effects of the 2002 argentine economic crisis although the total quantity and real value of goods purchased fell during the crisis consumers are found to be doing more shopping search this increase in shopping is shown to enable households to seek out lower prices and locate substitutes allowing a given level of expenditure to buy more goods the magnitude and prevalence of these effects suggest that this non market use of labor can be an important coping strategy for households during a recession

the elasticity of substitution between time and market goods evidence from the great recession we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products and increased coupon usage and shopping at discount stores we estimate a decline in returns to shopping during the recession therefore the increase in shopping behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on nonmarket work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions

the effect of female education on fertility and infant health evidence from school entry policies using exact date of birth this paper uses age at school entry policies to identify the effect of female education on fertility and infant health we focus on sharp contrasts in schooling fertility and infant health between women born just before and after the school entry date school entry policies affect female education and the quality of a woman s mate and have generally small but possibly heterogeneous effects on fertility and infant health we argue that school entry policies manipulate primarily the education of young women at risk of dropping out of school

returns to schooling for urban and migrant workers in china a detailed investigation abstractwe use a new data set the 2009 rural urban migration in china rumic to estimate returns to schooling in china using instrumental variable iv estimation after identifying a set of instruments we conduct comprehensive validity and relevance testing of different combinations of instruments as well as robustness analysis of our estimates for rural to urban migrants and urban residents in china we find that our point estimates are in the 6 9 range for urban workers compared to 7 8 for migrant workers returns for men at 8 9 are slightly higher than for women at 6 7 thus private returns to education in urban china in 2009 were not as high as other transition and developing countries but substantial and have increased over time comparing ols and iv estimates we also find that the attenuation bias due to measurement error is generally large and more important in the migrant sample compared to the urban sample

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

international capital mobility amongst the major industrialised countries too little or too much this paper examines capital flows among the major industrialized countries with a view to assessing m feldstein and c horioka s 1980 claim that international capital mobility is limited it argues that saving investment correlation tests are inherently flawed and proposes an alternative methodology for testing the degree of international capital mobility it finds that capital flows have been excessive in the sense that they are driven by speculative forces rather than by economic fundamentals copyright 1995 by royal economic society

the elasticity of substitution between time and market goods evidence from the great recession the elasticity of substitution between time and market goods we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products increased coupon usage and shopping at discount stores we estimate that the returns to these shopping activities declined during the recession and therefore this behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on non market work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions institutional subscribers to the nber working paper series and residents of developing countries may download this paper without additional charge at www nber org

the aggregate implications of regional business cycles during the last recession and its aftermath aggregate price growth and aggregate nominal wage growth remained robust despite the high rate of unemployment we document that u s states with weaker labor markets experienced lower price growth lower nominal wage growth and lower real wage growth during the great recession given that reliable measures of local prices do not exist we create our own state price indices using scanner data from the nielsen retail scanner database the main innovation of the paper is the development of an econometric procedure that combines cross region data with aggregate time series data to infer the underlying shocks driving both aggregate and regional business cycles applying our procedure to the great recession we find that a combination of both demand and supply shocks are necessary to account for the joint dynamics of aggregate prices wages and employment during the 2007 2012 period in contrast we find that only demand shocks are needed to explain the cross region variation the results suggest that only using cross region variation to explain aggregate fluctuations is insufficient when shocks do not have a substantive regional component

the effect of sibling sex composition on women s education and earnings this paper documents the impact of siblings on the education of men and women born in the united states between 1920 and 1965 we examine the effect of the number and sex composition of a boy or girl s siblings on that child s educational attainment we find that throughout the century women s educational choices have been systematically affected by the sex composition of her siblings and that men s choices have not women raised only with brothers have received on average significantly more education than women raised with any sisters controlling for household size since sibling sex composition affects women s educational attainment and plausibly may be unrelated to other determinants of earnings it may provide a useful instrument for education in earnings functions for women our results suggest that standard estimates significantly underestimate the return to schooling for women

income and wealth effects on private label demand evidence from the great recession we measure the causal effects of income and wealth on the demand for private label products prior research suggests that these effects are large and in particular that private label demand rises during recessions our empirical analysis is based on a comprehensive household level transactions database matched with price information from store level scanner data and wealth data based on local house value indices the great recession provides a key source of the variation in our data showing a large and geographically diverse impact on household incomes over time we estimate income and wealth effects using within variation of income at the household level and wealth at the zip code level our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization we establish a precisely measured negative effect of income on private label shares the effect of wealth is negative but not precisely measured however the estimated effect sizes

international business cycles the authors estimate a dynamic two country model in which economic fluctuations are driven by a worldwide supply shock country specific supply shocks and relative fiscal money and preference shocks identification is achieved using only long run restrictions based on a theoretical model the main results are 1 supply shocks particularly country specific ones are very important in generating international business cycles and 2 although the post 1973 flexible exchange rate period has been inherently more volatile there are no differences in transmission properties of economic disturbances across exchange rate regimes for the endogenous variables they focus on copyright 1993 by american economic association

constructing and estimating a realistic optimizing model of monetary policy abstract a dynamic stochastic general equilibrium dsge model with real and nominal both price and wage rigidities succeeds in capturing some key nominal features of u s business cycles additive technology shocks as well as multiplicative shocks are introduced and shown to be crucial monetary policy is specified as an interest rate targeting rule following developments in the structural vector autoregression var literature the interaction between real and nominal rigidities is essential to reproduce the liquidity effect of monetary policy the model is estimated by maximum likelihood on u s data and its fit is comparable to that of an unrestricted first order var besides producing reasonable impulse responses and second moments this model replicates a feature of u s business cycles never captured by previous research with dsge models that an increase in interest rates predicts a decrease in output two to six quarters in the future

trading down and the business cycle abstract we document two facts first during the great recession consumers traded down in the quality of the goods and services they consumed second the production of low quality goods is less labor intensive than that of high quality goods when households traded down labor demand fell increasing the recession s severity we find that the trading down phenomenon accounts for a substantial fraction of the decline in u s employment in the recent recession we show that embedding quality choice in a business cycle model improves the model s amplification and comovement properties

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

the cyclicality of sales regular and effective prices business cycle and policy implications author s coibion olivier gorodnichenko yuriy hong gee hee abstract we study the cyclical properties of sales regular price changes and average prices paid by consumers effective prices using data on prices and quantities sold for numerous retailers across many us metropolitan areas inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers this difference reflects the reallocation of household expenditures across retailers a feature of the data which we document and quantify rather than sales we propose a simple model with household store switching and assess its implications for business cycles and policymakers jel d12 e31 e32 l25 l81

the variability of inflation rates across household types it is well known that the consumer price index cpi measures the changing cost of the fixed market basket of an average consumer it is an aggregate economic indicator of changes in retail prices and in the process of averaging across individuals subsumes the variability in consumption patterns inherent in a modetn economy it is thus evident that the use of a single index in adjusting the incomes of broad groups of individuals has an automatic distributional impact individuals whose own price index rises more slowly than the index used to adjust their incomes experience a windfall benefit while those whose price index rises more rapidly experience a relative loss such variability in actual price experience relative to the average measured change in prices is soon to be of great importance to taxpayers throughout the income distribution the economic recovery tax act of 1981 calls for adjustments in tax tables so that inflation will not result in tax increases beginning not later than december 15 1984 12 public law 97 34 calls for using the official consumer price index for all urban con

something to talk about social spillovers in movie consumption we exploit the randomness of weather and the relationship between weather and moviegoing to quantify social spillovers in movie consumption instrumenting for early viewership with plausibly exogenous weather shocks captured in lasso chosen instruments we find that shocks to opening weekend viewership are doubled over the following five weekends our estimated momentum arises almost exclusively at the local level and we find no evidence that it varies with either ex post movie quality or the precision of ex ante information about movie quality suggesting that the observed momentum is driven in part by a preference for shared experience and not only by social learning

the returns to education microeconomics in this paper we focus on education as a private decision to invest in human capital and the estimation of the rate of return to that private investment while the literature is replete with studies that estimate the rate of return using regression methods where the estimated return is obtained as the coefficient on a years of education variable in a log wage equation that contains controls for work experience and other individual characteristics the issue is surrounded with difficulties we outline the theoretical arguments underpinning the empirical developments and show that the evidence on private returns to the individual is compelling despite some of these issues surrounding the estimation of the return to schooling our evidence based on estimates from a variety of datasets and specifications is that there is an unambiguously positive effect on the earnings of an individual from participation in education moreover the size of the effect seems large relative to the returns on other investments

inflation at the household level abstract we use scanner data to estimate inflation rates at the household level households inflation rates have an annual interquartile range of 6 2 9 0 percentage points most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods lower income households experience higher inflation but most cross sectional variation is uncorrelated with observables households deviations from aggregate inflation exhibit only slightly negative serial correlation almost all variability in a household s inflation rate comes from variability in household level prices relative to average prices not from variability in aggregate inflation

returns to women s education using optimal iv selection this paper investigates returns to women s education by applying an optimal iv selection approach post lasso iv estimation which improves the first stage predictive relationship between an endoge

positive assortative mating and spouses as complementary factors of production a theory of labour augmentation this article develops a model of intellectual labour augmentation to explain both the marriage wage premium and educational assortative mating we suggest that husbands and wives are complementary factors of production where a spouse s education and skills augment their partner s productivity and earnings potential we test this proposition using data from the 2000 us census of population and the 2003 current population survey our results indicate that for working couples the marriage premium for husbands and wives is directly related to the education level of their spouses suggesting that positive assortative mating may be attributable to the labour market effects of intellectual augmentation of married households

consumer shopping behavior how much do consumers save this paper documents the potential and actual savings that consumers realize from four particular types of purchasing behavior purchasing on sale buying in bulk at a lower per unit price buying generic brands and choosing outlets how much can and do households save through each of these behaviors how do these patterns vary with consumer demographics we use data collected by a marketing firm on all food purchases brought into the home for a large nationally representative sample of u k households in 2006 we are interested in how consumer choice affects the measurement of price changes in particular a standard price index based on a fixed basket of goods will overstate the rise in the true cost of living because it does not properly consider sales and bulk purchasing according to our measures the extent of this bias might be of the same or even greater magnitude than the better known substitution and outlet biases

the role of prices in measuring the poor s living standards in this paper we revisit two pieces of conventional wisdom in the current debate about poverty paying close attention to the price data underlying these findings that the poor pay more than households of higher income for the goods and services they purchase and that poverty rates at least as measured by the u s census have remained essentially flat since the late 1960s raising questions about the success of the policies implemented to reduce poverty by examining scanner data on thousands of household purchases we find that the poor pay less not more for the goods they purchase and by extending the advances on price measurement in the recent decade back to the 1970s we find that current poverty rates are less than half of the official numbers

estimating the economic return to schooling on the basis of panel data this paper is concerned with estimating the economic return to schooling of men in the netherlands an iv approach is adopted to estimate a panel data model with random individual effects the fact that older individuals have relatively less schooling than younger individuals is exploited to construct instruments and gnp per worker at the time an individual turned 16 is included to control for birth cohort effects the estimated return to schooling is about 15 ignoring the endogeneity of schooling results in a lower return to schooling ignoring birth cohort effects results in a lower return to work experience

consumption versus expenditure previous authors have documented a dramatic decline in food expenditures at the time of retirement we show that this is matched by an equally dramatic rise in time spent shopping for and preparing meals using a novel data set that collects detailed food diaries for a large cross section of u s households we show that neither the quality nor the quantity of food intake deteriorates with retirement status we also show that unemployed households experience a decline in food expenditure and food consumption commensurate with the impact of job displacement on permanent income these results highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income whereas measures of expenditures obscure the distinction

quantifying quality growth we introduce an instrumental variables approach to estimate the importance of unmeasured quality growth for a set of 66 durable consumer goods our instrument is based on predicting which of these 66 goods will display rapid quality growth using pooled cross relatively sections of households in the 1980 through 1996 u s consumer expenditure surveys we estimate quality engel curves for 66 durable consumer goods based on the extent richer households pay more for a good conditional on purchasing we use the slopes of these curves to predict the rate of quality upgrading just as if households are ascending these quality engel curves over time we find that the average price paid rises faster for goods with steeper quality slopes bls prices likewise increase more quickly for goods with steeper quality slopes suggesting the bls does not fully net out the impact of quality upgrading on prices paid we estimate that quality growth averages about 3 7 per year for our goods with about 60 of this or 2 2 per year showing up as higher inflation rather than higher real growth

putting the new open economy macroeconomics to a test abstract this paper explores one way to extend the new open economy macroeconomics in an empirical direction adapting maximum likelihood procedures it estimates and tests an intertemporal small open economy model with monetary shocks and nominal rigidities results offer mixed support for a benchmark model where prices are assumed to be sticky in the currency of the buyer price stickiness seems to be an important element as overall results are poorer for versions of the model in which prices either are flexible or are sticky in the currency of the producer the benchmark model does a better job explaining some variables than others in particular it does a poor job explaining exchange rate movements