Income Fluctuations and Firm Choice

Scott R. Baker*, Brian Baugh, Lorenz Kueng

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)2208-2236
Number of pages29
JournalJournal of Financial and Quantitative Analysis
Issue number6
StatePublished - Sep 2021

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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