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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Trading down and the business cycle |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | National Bureau of Economic Research |
| Series Name | NBER Working Papers |
| Number | 21539 |
| Date | 2017 |
| Abstract Text | 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. |
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| Digital Object Identifier | 10.3386/w21539 |
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| Keywords | Recessions, quality choice, business cycles |
| Additional Information | Paper Issued in September 2015, revised in October 2017 |