Consumption Inequality and the Frequency of Purchases†

American Economic Journal: Macroeconomics 2021, 13(4): 449–482 https://doi.org/10.1257/mac.20190115 By Olivier Coibion, Yuriy Gorodnichenko, and Dmitri Koustas* We document a decline in the frequency of shopping trips in the United States since 1980 and consider its implications for the mea- surement of consumption inequality. A decline in shopping frequency as households stock up on storable goods (i.e., inventory behavior) will lead to a rise in expenditure inequality when the latter is mea- sured at high frequency, even when underlying consumption inequal- ity is unchanged. We find that most of the recently documented rise in expenditure inequality in the United States since the 1980s can be accounted for by this phenomenon. Using detailed micro data on spending, which we link to data on club/warehouse store openings, we directly attribute much of the reduced frequency of shopping trips to the rise in club/warehouse stores. (JEL D12, D31, D63, D91, E21) ncome inequality has been rising sharply since the 1980s, raising concern among economists, policymakers, and the general public. However, whether consump- tion inequality has gone up in similar fashion, which is arguably more relevant for welfare, remains the subject of heated debate in the literature. Understanding what has happened to consumption inequality can also be informative about the forces underlying the rise in income inequality. For example, Krueger and Perri (2005) argue that improved financial intermedia- tion has allowed households to more easily smooth their consumption over transitory income shocks, thereby compressing consumption inequality. Relatedly, Blundell, Pistaferri, and Preston (2008) argue that much of the rise in income inequality since the mid-1980s came from transitory shocks (as opposed to permanent shocks) that households are able to partially insure themselves against, consistent with the Permanent Income Hypothesis (PIH) and the absence of a commensurate rise in...