Aggregate Consumption Research Articles

More than words: Can tone of consumer product reviews help predict firms’ fundamentals?

AbstractAlthough financial market participants are increasingly interested in the financial value of unstructured qualitative information regarding the prospects of a firm, empirical evidence remains sparse on the properties of qualitative content in consumer product reviews and their capital market implications. Using a broad sample of consumer reviews posted on Amazon.com, I examine whether the linguistic tone of aggregate consumer product reviews conveys information that is associated with firms’ sales, earnings, stock returns and risk. I find that aggregate review tone successfully predicts a firm's forthcoming quarterly sales. Moderating analyses show that this predictability is stronger for firms operating in a highly competitive environment. I further find that review tone predicts a firm's quarterly earnings surprises, abnormal stock returns and risk. A path analysis shows that the effect of review tone on stock prices is partially channeled through its effect on firms’ earnings. I finally find that negative review tone is more informative and useful than positive tone in predicting a firm's fundamentals. Importantly, these results hold after controlling for other review characteristics, including review rating, review volumeand review dispersion. Overall, my findings highlight the importance of considering the tone of consumer reviews when evaluating a firm's prospects and value.

Central EEG Beta/Alpha Ratio Predicts the Population-Wide Efficiency of Advertisements.

Recent studies have demonstrated that the brain activity of a group of people can be used to forecast choices at the population level. In this study, we attempted to neuroforecast aggregate consumer behavior of Internet users. During our electroencephalography (EEG) and eye-tracking study, participants were exposed to 10 banners that were also used in the real digital marketing campaign. In the separate online study, we additionally collected self-reported preferences for the same banners. We explored the relationship between the EEG, eye-tracking, and behavioral indexes obtained in our studies and the banners' aggregate efficiency provided by the large food retailer based on the decisions of 291,301 Internet users. An EEG-based engagement index (central beta/alpha ratio) significantly correlated with the aggregate efficiency of banners. Furthermore, our multiple linear regression models showed that a combination of eye-tracking, EEG and behavioral measurements better explained the market-level efficiency of banner advertisements than each measurement alone. Overall, our results confirm that neural signals of a relatively small number of individuals can forecast aggregate behavior at the population level.

The risk-premium channel of uncertainty: Implications for unemployment and inflation

This paper studies the role of macroeconomic uncertainty in a search-and-matching framework with risk-averse households. Heightened uncertainty about future productivity reduces current economic activity even in the absence of nominal rigidities. A risk-premium mechanism accounts for this result. As future asset prices become more volatile and covary more positively with aggregate consumption, the risk premium rises in the present. The associated downward pressure on current asset values lowers firm entry, making it harder for workers to find jobs and reducing the supply of goods. With nominal rigidities the recession is exacerbated, as a more uncertain future reinforces households' precautionary behavior, which causes demand to contract. Counterfactual analyses using a calibrated model imply that unemployment would rise by less than half as much absent the risk-premium channel. The presence of this mechanism implies that uncertainty shocks are less deflationary than regular demand shocks, nor can they be fully neutralized by monetary policy.

PACEMweb: a tool for aggregate consumer exposure assessment

BackgroundTo ascertain the safe use of chemicals that are used in multiple consumer products, the aggregate human exposure, arising from combined use of multiple consumer products needs to be assessed.ObjectiveIn this work the Probabilistic Aggregate Consumer Exposure Model (PACEM) is presented and discussed. PACEM is implemented in the publicly available web tool, PACEMweb, for aggregate consumer exposure assessment.MethodsPACEM uses a person-oriented simulation method that is based on realistic product usage information obtained in surveys from several European countries. PACEM evaluates aggregate exposure in a population considering individual use and co-use patterns as well as variation in product composition. Product usage data is included on personal care products (PCPs) and household cleaning products (HCPs).ResultsPACEM has been implemented in a web tool that supports broad use in research as well as regulatory risk assessment. PACEM has been evaluated in a number of applications, testing and illustrating the advantage of the person-oriented modeling method. Also, PACEM assessments have been evaluated by comparing its results with biomonitoring information.SignificancePACEM enables the assessment of realistic aggregate exposure to chemicals in consumer products. It provides detailed insight into the distribution of exposure in a population as well as products that contribute the most to exposure. This allows for better informed decision making in the risk management of chemicals.ImpactRealistic assessment of the total, aggregate exposure of consumers to chemicals in consumer products is necessary to guarantee the safe use of chemicals in these products. PACEMweb provides, for the first time, a publicly available tool to assist in realistic aggregate exposure assessment of consumers to chemicals in consumer products.

How does exchange rate elasticity of aggregate consumption adjust currency risk price in the stock market?

Based on a simple two-good, two-country CCAPM framework, in which aggregate consumption growth is connected to exchange rate fluctuations by the exchange rate elasticity of aggregate consumption (EREAC), we extend a parsimonious international CAPM model to detect the role of EREAC in the change in currency risk price and illustrate that EREAC moves explain the time-varying nature of currency risk price. In our model, currency risk price is expressed as a function of both EREAC and its related threshold value. Thus, under the condition of the identified correlation directionality between stock returns and exchange rate fluctuation, we claim that EREAC influences the currency risk price, where the two types of EREAC states (above or below its threshold value) have inverse effects on the currency risk price direction. Through an empirical test, we find evidence that EREAC can sagaciously adjust the currency risk price as we propose. Our main result implies that EREAC can be as a potential state variable in currency risk prices, and from the perspective of EREAC moves, we can give a partially plausible interpretation of the cause of the time-varying nature of currency risk prices to some extent.

Optimal channel strategy of luxury brands in the presence of online marketplace and copycats

The strategic interaction between authentic luxury brands and their copycats has evolved since the proliferation of online marketplaces. Using a game-theoretic framework, we examine how an authentic luxury brand, observing the strategic behavior of its competing copycats, should make its optimal entry decision to a third-party online marketplace. Our findings reveal that the authentic luxury brand does not sell on the online marketplace when either the quality or the physical resemblance of the copycat to the authentic luxury brand is high. This contributes to the related literature by offering an explanation for the increasing quality of copycats amid the e-commerce boom —improving the quality of the copycat can deter the authentic luxury brand from selling on the online marketplace. Furthermore, by comparing our equilibrium outcome with the benchmark case where the authentic luxury brand does not consider selling on the online marketplace at all, we show that the authentic luxury brand’s potential entry to the online marketplace is sufficient to induce the copycat to improve its quality and lower its price, thereby improving the aggregate consumer surplus. In addition, the online marketplace can always be better off allowing the entry of the copycat if there is no external enforcement against copycats. We show that our key results are valid in various extensions and they offer multiple managerial implications.

The Effect of Consumer Confidence and Subjective Well-being on Consumers' Spending Behavior.

The paper focuses on the role of consumer confidence and selected well-being measures in aggregate consumption and in subsets of aggregate consumption on a broad set of 22 OECD countries. Consumer confidence played a positive and statistically significant role in the development of expenditures especially on durable and semi-durable goods and services. The increase in cognitive, affective and eudaimonic measures of well-being, measured by the Cantril ladder, positive and negative affect and freedom to make life choices variables, had negative impact on total consumption and expenditures on semi-durable goods and services. Possible explanations for these estimates are provided in the paper. Based on the purpose of expenditure, consumer confidence was a significant determinant of all expenditures except for unavoidable spending such as food, health, housing, water, energy, and fuel. The subjective well-being indicators showed a negative impact on expenditures on clothing and footwear, recreation and culture, and restaurants and hotels. Possible explanations for the positive and negative effects of subjective well-being measures on consumption, benefits of including the freedom of choice variable, and directions for future research regarding the introduction of understudied variables are discussed.

The Relationship between Inequalities in Household Sports Consumption Expenditures and Income Level.

Inequalities in income, wealth, quality of life, health and education are an intensively researched field of economics. In this study, we examine the inequality in sports expenditures of Hungarian households. We hypothesize that the development of income inequalities will also correlate significantly to inequalities in sports consumption, and this trend has been intensifying over the past two decades. The research is based on the Household Budget Survey database of Hungarian households for the period 2005-2017. The net income conditions of the population and the sports expenditure items recorded on the basis of the COICOP nomenclature are examined by income decile. Data is analysed using descriptive statistics, inequality indicators and correlation calculations. Aggregate household expenditures on passive sports consumption show a stagnant trend, while aggregate expenditures on active sports consumption follow a slightly upward trend among the Hungarian population. Inequality indicators show growing inequalities in terms of income and sports expenditure over the reviewed period. Income inequality and sports spending inequality move together. The Hungarian population is becoming polarised in terms of both income and level of sports expenditure.

The Path of Remittances to Consumption or Saving! Albania Case Study

Since the change of the political systems in the 1990-s in Albania, massive emigration has been a continuous phenomenon of different scales in Albania. The outflow migration phenomenon is associated with the inflow of remittances to the origin families. Remittances have been a vital financial source of living for a considerable number of households. Therefore, they constitute an important financial mechanism for funding the country's economy. Empirical regression analysis in emerging economies suggests ambiguous results of remittances in the economy. Therefore, it is the purpose of this paper to investigate the effect of remittances on macroeconomic variables such as aggregate consumption, national saving, and the economic growth rate in Albania. Econometric models based on the ordinary least squared method (OLS) are performed to analyze the effect among the variables, and time series data are retrieved from the World Bank and Institute of Statistics of Albania databases. Model results based on data from the period 1992-2019 show that most of the remittance income is consumed by the recipient families contributing to the aggregate consumption demand. According to the model’s results, a 1 percent increase in remittances contributes to a 3.2 percent increase in aggregate consumption in the country. While remittances have neither a significant effect on a country's national aggregate saving nor the country's economic growth rates.

Asset pricing with two types of heterogeneous consumption volatilities in mind: Evidence from China

Recent studies have highlighted asymmetric asset pricing in different economic states. We divide China's aggregate consumption into two specific sets and determine two heterogeneous consumption volatilities. One positively mirrors the state of good times, and the other positively maps the state of bad times. We then propose a consumption-based asset pricing model that is associated with economic times, in which two pricing factors related to the two consumption volatilities play antagonistic roles. Theoretical and empirical analyses based on the model indicate that equity premiums are low during good times but high during bad times. Specifically, equity premiums are more susceptible to bad times. Moreover, the model plausibly accounts for variations in cross-sectional patterns and outperforms three- and five-factor models (Fama and French, 1993, 2015) at the stock portfolio level owing to its relatively minimal pricing error.

A comment on “wealth inequality and endogenous growth” by Byoungchan Lee

How does wealth inequality affect economic growth? Byoungchan Lee answers this question by developing a heterogeneous-agent model and augmenting it with endogenous firm innovation. The novel channel is that rising wealth concentration reduces aggregate demand, which gives firms a disincentive to spend on R&D and therefore leads to slower productivity growth. In this discussion, we first explain the difference in calibration strategy between Lee’s approach and the common approach in the literature, and then discuss its quantitative implications for the effect of rising inequality on aggregate consumption.

Wealth Inequality and Endogenous Growth

Advanced economies have been experiencing productivity slowdowns, rising inequality, and low consumption-to-wealth ratios in recent decades. Using an analytically tractable endogenous growth model with heterogeneous households, I emphasize a channel that connects inequality with productivity growth through aggregate consumption demand and the returns to R&D. Given realistic increases in wealth (inclusive of income) inequality, the calibrated model generates transition dynamics featuring productivity slowdowns, low aggregate demand, and low real interest rates, consistent with the empirical trends. The welfare cost of rising inequality is substantial and is nearly equally split between changes in the consumption distribution and slow growth.

Water stress and the expenditure in zoning violated areas of Chennai: An empirical investigation

India as the largest user of groundwater in the world faces the risk of resources depletion and degradation. The study focuses on groundwater degradation and drinking water expenditure in 45 locations of 15 Zoning Violated Areas (ZVAs) in Chennai. We collected 45 groundwater samples in each pre- and post-monsoon seasons for testing heavy metals concentration levels and compared them with the World Health Organization (WHO)/the Bureau of Indian Standards (BIS) drinking water standards. We surveyed 797 households in the 14 ZVAs and statistically analysed drinking water expenditure. Scientific analysis reveals that Cadmium and Nickel are 15 and 7 times higher than the WHO/BIS standards in Nagalkeni of Pammal area. The analysis also shows that higher levels of concentrations of Lead, Nickel, Chromium and Cadmium in the groundwater in 25, 13, 3 and 1 locations respectively. Survey analysis indicates that 3,21,102 households have incurred an aggregate expenditure of $52.72 million per year on drinking water. The analysis shows that each of the economically weaker, lower-middle and upper middle-income groups spend, on average, 11.64, 4.72 and 2.55 per cent of their daily income, respectively on drinking water. The study also informs that Pammal is the most vulnerable area in groundwater contamination and households in Ambattur area has incurred highest expenditure on drinking water. The regression analysis of the data reveals that variables, such as metro water, income and family size are statistically significant in explaining the water expenditure. The Computable General Equilibrium model for Chennai estimates shows that the increase in water resources and economic growth under the assumption that all the households will, and economically weaker sections will not, contribute to investments for drinking water resources. The study proposes a household-right-to-know legislation, adequate metro water supply and an incentive-structured compatible land-use regulation to achieve sustainable use of groundwater resources.

Social welfare and the unrepresentative representative consumer

AbstractIf, for all prices, income distribution is optimal for a planner with a social welfare function, then aggregate demand is the same as that of a single “representative consumer” whose preferences over aggregate consumption are the same as the planner's. This paper shows that the converse is false. Aggregate demand may be the demand function of a representative consumer although the income distribution is not optimal for any social welfare function. The representative consumer may be Pareto inconsistent, preferring situation A to B when all the actual consumers prefer B to A. We give conditions under which existence of a representative consumer implies that the income distribution satisfies first order conditions for optimality. Satisfying the first order optimality conditions for an additively separable social welfare function is essentially equivalent to aggregate demand for every pair of consumers having a symmetric Slutsky matrix.

Persistent Crises and Levered Asset Prices

Abstract This paper shows that standard disaster risk models are inconsistent with movements in stock market volatility and credit spreads during disasters. We resolve this shortcoming by incorporating persistent macroeconomic crises into a structural credit risk model. The model successfully captures the joint dynamics of aggregate consumption, financial leverage, and asset market risks, both unconditionally and during crises. Leverage strongly amplifies fundamental shocks by continuing to rise while crises endure. We structurally estimate the model and show that it replicates the firm-level implied volatility curve and its cross-sectional relation with observable proxies of default risk.

Household consumption expenditures and the performance of provincial VAT revenue in Indonesia

<p>This study examines the relationship between household consumption expenditures and the performance of VAT revenue at the provincial level in Indonesia during 2011-2019. Household consumption is divided into food and non-food contests. The PPN performance indicator is shown by the PPN C-efficiency ratio which is calculated from the VAT revenue for each province divided by the VAT rate multiplied by the Consumption GRDP. The results of the regression using the fixed-effect panel data estimation model show a positive and significant relationship between household consumption and VAT revenue in the province. This means that increasing aggregate household consumption, both food and non-food consumption, will increase the VAT-C efficiency ratio. The results also show that an increase in the consumer price index that is not followed by an increase in income will decrease VAT performance. Furthermore, the increase in the share of the tertiary sector as a direction of structural transformation will weaken the performance of VAT receipts. This is possible because the tertiary sector is still dominated by the service sector which is not subject to VAT and the trade sector in which there is a high level of informality.</p>

Zakat Effect on Aggregate Consumption in Islamic Economy in Cirebon

Zakat is a tax collected from Muslim rich people to help the poor Muslim community . Results of research conducted at BAZNAS Cirebon shows that the effect of zakat can have an effect on aggregate consumption. The MPC (Marginal Propensity to Consume) value obtained for muzakki is 0.46 and mustahik is 0.76. It shows that the mustahik MPC is greater than the muzakki MPC, meaning that there is an increase in aggregate consumption due to the large change in mustahik's income. Wealthy groups who pay zakat are more stable than other rich groups who do not pay zakat, this can be seen when the income of muzakki and other rich groups is the same, the MPC values are different , namely MPCZ = 0.4 and MPCK = 0.7 . The value of MPCZ muzakki (zakat) is closer to zero than MPCK muzakki (non-zakat) which is close to one, meaning that the consumption of muzakki (zakat) is more stable. This shows that the increase in aggregate consumption in the Islamic economy is better than the conventional economy.

Identification Robust Empirical Evidence on the Open Economy IS‐Curve

AbstractExisting empirical evidence on the Euler equation based on closed economy models suggests low responsiveness of aggregate consumption to changes in interest rates. We incorporate open economy features and consider extensions that include habit formation and hand‐to‐mouth consumers. For several open economies and applying econometric methods that are robust to weak instruments and structural changes, we continue to find low values for the elasticity of intertemporal substitution, implying a small effect of real interest rate changes on aggregate income. In some countries, structural changes are informative for identification, but otherwise aggregate data provide limited information to learn about IS‐curve specifications.

Commercial consumers pay attention to marginal prices or average prices? Implications for energy conservation policies

Any energy conservation policy intervention associated with energy price variation needs to consider whether consumers respond to marginal or average pricing. To the best of our knowledge, there is no such evidence for commercial electricity consumers (such as office buildings and malls), although commercial consumers are responsible for nearly 18% of electricity consumption in the United States. This study examines a four-tiered decreasing-block pricing schedule for commercial consumers. Based on individual-consumer-level data, we analyze the daily electricity consumption of 597 commercial accounts in Phoenix metropolitan, Arizona, from May 1, 2013, to December 31, 2016. We run 2SLS models with policy-induced price variation as instrumental variables to estimate the effects of marginal and average prices on commercial electricity consumption at each cutoff point. We also study the heterogenous response across industry sectors. Our analysis shows that commercial consumers respond to both marginal and average prices, but have different responses with respect to how much electricity they consume. Higher-usage consumers tend to respond more to average prices, whereas lower-usage consumers are more sensitive to marginal prices. Our findings indicate that conservation policies should be tailored differently for commercial electricity consumers. Nonlinear electricity pricing structures can reduce energy consumption, particularly for commercial consumers who have lower energy demand if the pricing structure shifts from decreasing to increasing blocks. In contrast, a flat rate with a higher price level can limit the electricity consumption of high-use consumers. As for an industry-wise policy design, nonlinear pricing can be effectively used to reduce aggregate consumption in the construction, manufacturing, real estate, and rental and leasing industries, professional, scientific, and technical services, other services (except public administration), and public administration industries.

Estimating Regional Aggregate Economic Value of Forest Recreation Services with Linked Travel Cost Model

Multi-site linked travel cost models answer the need for aggregate demand and economic value estimations that consider the attributes of all forest recreation sites in a region and the preferences of visitors at the regional level. This study aimed to predict the aggregate value of forest recreation services in Ankara Province, Turkey, with a discrete choice-count data-linked model in the context of current and changing levels of forest attributes. In the first stage, the site choice model was predicted with the random parameter logit model; in the second stage, the trip demand model was estimated with the negative binomial model. The expected consumer surplus per trip derived from the first model was used as the link variable in the second model. The expected consumer surplus per trip of 14 forest recreation sites was estimated at 137.34 TL, and the annual aggregate consumer surplus per capita was estimated at 156.59 TL—a total of 13.49 million TL in the study area. This study predicts the total benefit will increase by 65% if the development stage of stands at recreation sites increases by two stages, degraded stands are improved, stands have a normal canopy, and the camping facilities are improved.