Non-durable Consumption Research Articles

A MATLAB platform for production planning in batch processing firms producing items that are jointly replenished

Rising levels of poverty have prompted manufacturers of non-durable consumer goods to explore opportunities at the lower end of the wealth spectrum. To enhance affordability for low-income consumers, these goods are often packaged in various sizes, including single-serve sachets. While numerous models and algorithms have been developed to determine the optimal frequency of manufacturing runs and packaging setups for the simultaneous replenishment of different pack sizes, there is a notable lack of literature addressing their implementation by small and medium-sized enterprises (SMEs) in this sector. This gap may be attributed to the absence of accessible source codes, a shortage of model experts, and the complexity involved in manual calculations. To address this issue, we developed a user-friendly MATLAB software platform based on Goyal’s algorithm, tailored specifically for SMEs. The software prioritizes simplicity, interactivity, and flexible visual displays. It was validated against examples from existing literature and through randomly generated scenarios. Users can easily compute the optimal number of manufacturing setups, packaging frequencies for each pack size, and the associated costs by inputting relevant data such as manufacturing setup, inventory holding and packaging setup costs, and demand for each pack size. Importantly, users do not need expertise in modeling to operate the software. However, it is designed for single-product deterministic environments; future research should explore multi-product and stochastic modeling scenarios.

Nonsubstitutable Consumption Growth Risk

Standard applications of the consumption-based asset pricing model assume that goods and services within the nondurable consumption bundle are substitutes. We estimate substitution elasticities between different consumption bundles and show that households cannot substitute energy consumption by consumption of other nondurables. As a consequence, energy consumption affects the pricing function as a separate factor. Variation in energy consumption betas explains a large part of the premia related to value, investment, and operating profitability. For example, value stocks are typically more energy intensive than growth stocks and thus riskier, because they suffer more from the oil supply shocks that also affect households. This paper was accepted by Lukas Schmid, finance. Funding: C. Schlag gratefully acknowledges research and financial support from the Leibniz Institute for Financial Research SAFE. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.01269 .

A Study on the Impact of Hallyu (Korean Wave) on Korea’s Consumer Goods Exports to China: Panel Analysis Using Big Data and Provincial-Level Data

This study empirically analyzes how the Hallyu (Korean Wave) phenomenon affects Korea’s consumer goods exports to China using Chinese provincial-level panel data covering the period from 2011 to 2020. This paper adopts Baidu Index big data with the keywords “Korean drama”, “Korean movie”, “Korean music”, and “Korean entertainment” as proxy variables for Hallyu. The paper investigates the impact of Hallyu on Korean consumer goods exports by subdividing consumer goods into seven processing steps. In addition to the effect of the composite Hallyu index, the effect of each Hallyu content is also examined. Moreover, this study also investigates the impact of the political issue of the deployment of the THAAD American anti-ballistic missile defense system by dividing the period from 2011 to 2020 into before and after 2016. An export equation that includes income level, the Hallyu index, as well as other variables recognized as factors affecting Korea’s exports in existing studies, is used. Several interesting conclusions have been reached. First, Hallyu in China has a significant impact on Korea’s exports of non-durable consumer goods and processed household food and beverages to China. Second, the political issue of the deployment of THAAD has a negative impact on Korea’s exports of consumer goods to China. Third, among the four types of Hallyu content, dramas, as the most popular content in China, have the greatest influence on Korea’s exports of consumer goods to China.

When do consumers buy during online promotions? A theoretical and empirical investigation

An increasing number of merchants are using online platforms to promote their products; however, much is still unknown about how consumers behave in response to online promotions. This study investigates factors affecting consumers' purchase intentions and purchase behaviors during online promotions. We classify consumers into two categories, one mainly affected by the time pressure of promotion and the other primarily subject to the effect of memory decay. We then propose an analytical model to capture the market demand during an online promotion. Our analytical result indicates that there exist four types of demand patterns during online promotions, i.e., U-shape, inverted U-shape, monotonically increasing, and monotonically decreasing. We subsequently explore factors that can affect the type of demand patterns, such as the product type (nondurable and durable goods), duration of the promotion, discount level, and product category. Our empirical analyses of real-world promotion and sales data from a B2C e-commerce platform validate the analytical results. The type of demand curves depends on the characteristics of the goods and promotions. For instance, the inverted U-shape demand curve appears only for nondurable consumer goods, whereas the U-shape curve exists only for durable consumer goods. Finally, in a series of counterfactual analyses based on the proposed model, we show how revenues change during an online promotion in response to varying parameters of promotions and derive some interesting observations. These findings provide important insights to online retailers and can help them better understand their consumers and optimize their product promotion strategies.

Housing Market and Household Consumption in Urban China: A Debt Perspective

Urbanization precipitates substantial economic transformations, with housing markets playing a pivotal role. The expansion of cities escalates housing demand, subsequently increasing housing debt, which is a crucial factor influencing household consumption. This study utilizes data from six rounds of the China Family Panel Studies (CFPS) spanning 2010 to 2020 to investigate the impact of housing debt on household consumption in urban China. Given the dynamics changes in housing debt status, as well as the endogeneity problems caused by reverse causality and selection bias between households’ debt decisions and consumption behavior, this study employs both the difference-in differences with multiple periods and groups (DIDM) model and the two-way fixed effects model. The results show that the average consumption expenditure of households with housing debt is 14% higher than those without. A 1% increase in housing debt size correlates with a 0.011% rise in consumption. Moreover, this positive effect is more pronounced among low-income households and those with older household heads, as well as those owning multiple properties. Compared to non-durable consumption, the impact of housing debt is more substantial on durable consumption. Further mechanism analysis reveals that the effect of housing debt on household consumption is primarily driven by an increase in housing assets, spurred by the rising housing prices. This study underscores the importance of integrating housing debt management within the framework of sustainable urban development, which not only ensures equitable access to housing but also fosters the promotion of sustainable consumption.

Consumption and Liquidity Shocks

AbstractWe study the response of consumption to anticipated and unanticipated liquidity gains using information on gifts (occasional and recurrent) and severance pay from the Italian Household Income and Wealth survey. Consistent with standard intertemporal consumption models, we find that unanticipated income shocks affect nondurable consumption while anticipated shocks have no effect. In the former case, the marginal propensity to consume is estimated to be around 7%. We find also that this consumption response is stronger for poor households (around 10%) and negligible for rich ones.

INFERENCE IN PARTIALLY IDENTIFIED PANEL DATA MODELS WITH INTERACTIVE FIXED EFFECTS

In this paper, we develop methods for statistical inferences in a partially identified nonparametric panel data model with endogeneity and interactive fixed effects. Under some normalization rules, we can concentrate out the large-dimensional parameter vector of factor loadings and specify a set of conditional moment restrictions that are involved with only the finite-dimensional factor parameters along with the infinite-dimensional nonparametric component. For a conjectured restriction on the parameter, we consider testing the null hypothesis that the restriction is satisfied by at least one element in the identified set and propose a test statistic based on a novel martingale difference divergence measure for the distance between a conditional expectation object and zero. We derive a tight asymptotic distributional upper bound for the resultant test statistic under the null and show that it is divergent at rate-N under the global alternative. To obtain the critical values for our test, we propose a version of multiplier bootstrap and establish its asymptotic validity. Simulations demonstrate the finite sample properties of our inference procedure. We apply our method to study Engel curves for major nondurable expenditures in China by using a panel dataset from the China Family Panel Studies.

A Test of the Permanent Income Hypothesis When Households are Less Constrained

AbstractIn 2009, the Australian Government delivered approximately $8 billion in direct payments to households. These payments were randomly allocated over a 5‐week period. Panel model estimates show that for the average household, there was no significant disbursement effect on nondurable consumption. Only for relatively young and low‐income households, for example, at the bottom 10th percentile of each, was there a significant positive effect of the tax bonus payment on nondurable consumption. We argue the null findings on average could be due to macroeconomic and institutional differences leaving Australian households less constrained than their U.S. counterparts.

The impact of unanticipated wealth effects on consumption: evidence from Spanish panel data

Purpose The purpose of this study is to estimate the housing wealth effect on non-durable consumption using data from the Spanish Survey of Household Finances (Encuesta Financiera de las Familias, SHF) for the period 2002–2017. Design/methodology/approach The authors aim at identifying the effect of anticipated and unanticipated housing wealth changes on consumption with the sample of homeowners, following Paiella and Pistaferri (2017). Findings Results of this study lead us to conclude that there exists a strong housing wealth effect on consumption for the Spanish households. Originality/value The authors provide evidence against the permanent income model. They also analyse how the results change with income expectations, age and the household indebtedness rate. Finally, they detect a strong excess sensitivity to income.

How Does the Cultural Background Affect the International Business: A Readable Case Study of Costco in China Mainland

When an international corporate enters a foreign business, it has to classify cultural differences to adapt to the new condition. For instance, customers with different cultural backgrounds would have different reactions to a new business. Cultural background may affect customer behavior and even further, international business. In 2019, one of the largest chains of the membership-only wholesale club, Costco, opened its first store in China in Shanghai. As an American multinational corporation, it is a typical case for researching the difference between consumers with different backgrounds, hence, this paper chooses Costco as the sample and makes a readable case study. The research of this study is mainly based on a questionnaire survey of 211 Costco customers and analysis of several events in China related to Costco. The result of the case study reflected the cultural attributes of foreign brands in the view of Chinese consumers and suggested how the international enterprises could attract Chinese consumers by their cultural attributes. The goal of this paper is to provide a reference for multinational enterprises, especially the enterprises of retail trade, consumer nondurables, and consumer durables, to plan their operations, branding, and marketing in China.

DO SMART PEOPLE PREFER TO CONSUME? THE ROLE OF COGNITIVE ABILITIES IN HOUSEHOLD CONSUMPTION

Extant research has established that psychological factors such as risk attitude and peer effect are important antecedents of household consumption. In this paper, we investigate whether and to what extent cognitive ability affects household consumption expenditure. Using survey data in 2018 from the China Family Panel Studies (CFPS), we find that cognitive ability of the head of the household is positively related to overall consumption and non-durable consumption, i.e., smart people in China are more willing to consume. Our results are robust to controlling for level of education and accounting for potential endogeneity issues. In addition, the positive relationship between cognitive ability and household consumption is stronger for medium-income, elderly, urban and male-headed households. Moreover, wealth, information and social network play important mediating roles in the positive relationship between cognitive ability and household consumption. Overall, our study implies that broadening investment and consumption channels and enhancing information accessibility in the long term are important in stimulating household consumption.

State Policy to Attract Investment Based on Tax Exemption: Economic Analysis of Developing Countries in the 2016-2022 Period

This paper is intended to respond to the following questionings: facing national policies dismantling, which focused on regional development and heterogeneity obliteration among the different regions, how much can state tax and financial incentives alter inter-regional labor division and change territorial productive specializations? Do fiscal incentives necessarily change state industrial activity within national production? Do they bear straight relation to the state productive structures’ alterations? The subsidizing data, for the present analysis, illustrate that tax reduction do not necessarily contribute to regional industrial activity decentralization. Furthermore, many of the activities which were favored by the aforementioned incentives and presented spatial decentralization were also influenced, to a considerable extent, by other conditioning circumstances, mainly observed in non-durable consumer goods’ producing activities. This paper aims to show that the Ceará State policy of attraction of companies, since the years 2018-2022, was not capable of modify the participation of the state in the Value of the Industrial Transformation, neither promote significant changes in its productive structure in a way to offer greater diversification and bigger complexity of its industrial structure.

Skin in the Game: An Analysis of Venture Capital Investment in Dermatology from 2002 to 2021

Skin in the Game: An Analysis of Venture Capital Investment in Dermatology from 2002 to 2021

House Prices and Consumption: A New Instrumental Variables Approach

We introduce a novel Bartik-like instrument for house prices consisting of the local composition of housing characteristics interacted with aggregate changes in the marginal prices of these characteristics. Using household-level panel data, we estimate elasticities of nondurable consumption expenditures with respect to house prices of around 0.1. These consumption effects are concentrated among the young and those most likely to be facing tight borrowing constraints. A decomposition shows that identifying variation in the instrument is associated with times and locations where house prices have varied the most: during the housing bust of the mid-2000s and in the western United States. (JEL D12, E21, G51, R21, R31)

Impact of Goods Distribution in the Last Mile: An Investigation in the City of São Paulo

The number of goods deliveries made in the city of São Paulo has been rising every year. This growth is caused by new consumption habits, as people increasingly opt for online shopping, having goods delivered to their homes or neighborhood markets. However, these deliveries have become increasingly complex because of several issues found in the last-mile distribution of goods. This research sheds light on the interactions among issues related to truck circulation restrictions, receiver characteristics, accessibility and delivery planning, urban road infrastructure, driver behavior, and safety and risk problems that hamper last-mile delivery distribution. Data were collected (via a questionnaire) from drivers who work in the urban distribution of non-durable consumer goods in the city of São Paulo. From the data, structural equation modeling is proposed to evaluate these interactions. Empirical results demonstrate that “lack of accessibility and delivery planning” and “poor urban road infrastructure” are the elements that have the most impact on the “safety and risk problems in urban freight distribution” from the driver’s point of view. These results also contribute to mapping the main problems encountered in the last-mile delivery distribution in the city of São Paulo.

The social transmission of economic sentiment on consumption

This paper investigates the causal effect of economic sentiment on consumption using Gallup micro-data between 2008 and 2017. After showing that individuals update their beliefs about the national state of the economy in response to local housing and labor market fluctuations, I use the Facebook Social Connectedness Index (SCI) to construct an SCI-weighted index of housing price growth that captures individuals’ exposure to housing market shocks in connected zip codes. Using plausibly exogenous variation in individuals’ exposure to friends who experience heterogeneous housing price growth, I find that a standard deviation rise in economic sentiment is associated with a 17.3–24.6% rise in consumption of non-durables.

Sooner or later? The impact of child education on household consumption

We study the impact of one more year of child’s education on household (non-durable) consumption. We exploit an exogenous shock generated by a university reform in Italy in the early 2000s. We find that families responded in a way that is consistent with education as a production good. The higher child’s education produced household positive, permanent income innovations. Hence, family non-durable consumption increased. Our findings suggest that education can be an insurance device against adverse permanent income shocks. The 2001 reform not only positively affected offspring’s years of schooling, but it also had a positive effect to boost household consumption.

Intellectual Capital and Brands: Relationships between Two Kinds of Intangible Assets

The aim of this research is to know what the relevant literature says about 2 assets, belonging to the same category of intangibles and what their relationships (if any) are: the intellectual capital and brands. Generally, what the literature on intellectual capital lists are other topics, all of a non-intangible nature, such as business performance, competitive advantages, innovation, in particular. From the analysis and interpretation carried out in the papers selected for the aforementioned literature review, this did not allow finding a value for the brand, because even with an adequate formula, its value in € is not known, since it is dependent to know, also in €, the value of intellectual capital. It is thus observed that, evaluating a brand is dependent on evaluating the intellectual capital. If this one cannot be evaluated, so will that one. It was noted in particular that the brands considered were inserted in activity sectors, in a generic way, not materializing in anyone, in particular. On the other hand, the non-durable consumer goods sector and, in particular, the presence of the marketing aspect is completely omitted. This, in none of the cases, is referred to as what concerns communication, communication models, and even the principles of communication plans. In addition, brand functions and components, the creation and development of a brand, the identity prism, and even storytelling, are not present, instead of what they should be, working as expressions of intellectual capital in the context of brands, goods, and companies.

Do households with debt cut back their consumption more? New evidence from the United Kingdom

AbstractWe investigate whether the debt position of UK households affects the response of nondurable consumption to income and wealth changes. We construct a novel estimate of nondurable consumption to track the same individual households over time for an extended period ranging from 1993 to 2017. Using this series, we explore how household indebtedness propagates negative and positive income and wealth changes to consumption responses. We assess whether negative and positive shocks imply the same consumption adjustments and whether such mechanism is crisis specific. Our evidence reveals that falls in income trigger substantially larger adjustments in consumption than income rises for households with debt, while the findings for wealth are less conclusive. The results also point to a macro‐financial link between a debt overhang and consumer spending, which carries implications for macro‐prudential policy makers aiming to ensure household resilience. These effects are not specific to the financial crisis period.

RELATION BETWEEN NEGATIVE TONE IN NEWS RELEASES OF WHO AND INDUSTRY RETURNS DURING THE COVID-19 PANDEMIC

We analyze the relationship between the negative tone in news releases issued by the WHO and industry returns during the Covid-19 pandemic. We construct our news tone measure as the ratio of negative words to the total number of words present in news releases of WHO. The news tone shows to be significantly associated with returns for the majority of industries. Bad news announced by the WHO translates into good news for consumer nondurables, telecommunications, and healthcare sectors. Negative tone in news releases of WHO is on average bad news for consumer durables, manufacturing, energy, and other industries. Our findings suggest that the news tone-return relation varies significantly throughout our Covid-19 sample.