Trading Down and the Business Cycle

Nir Jaimovich, Sergio Rebelo () and Arlene Wong ()

No 21539, NBER Working Papers from National Bureau of Economic Research, Inc

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 severity of the recession. We find that the trading-down phenomenon accounts for a substantial fraction of the fall 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.

JEL-codes: E1 E2 E3 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-dge and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Nir Jaimovich & Sergio Rebelo & Arlene Wong, 2019. "Trading Down and the Business Cycle," Journal of Monetary Economics, .

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Related works:
Journal Article: Trading down and the business cycle (2019)
Working Paper: Trading Down and the Business Cycle (2015)
Working Paper: Trading down and the business cycle (2015)
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