Essays in International and Development Economics
- Author(s): Li, Nicholas
- Advisor(s): Gourinchas, Pierre-Olivier
- et al.
Standard analysis of consumer behavior uses theory and evidence on quantities and prices to measure consumer welfare, particularly through the use of price indexes that capture the cost-of-living. In three essays I go beyond this standard analysis to analyze the impact of household variety, store variety, and energy requirements on food demand, consumption patterns and consumer welfare, with implications for several important topics in development and international economics.
In the first essay I develop theoretical and empirical tools for analyzing variety-seeking behavior by households in a non-homothetic setting, showing how changes in the slope and intercept of ``variety Engel curves'' map into the level and distribution of consumer welfare in a way that is not captured by standard analysis. The ``cost'' of variety is introduced as an important concept for analysis that is distinct from price, e.g. the ``cost'' of quantity. The application to Indian food consumption indicates that increases in food variety over time and greater urban food variety are not attributable solely to income growth, with significant implications for both the size and distribution of welfare gains from variety.
In the second essay, co-authored with Shari Eli, we continue to explore empirical patterns in Indian food consumption and draw attention to the decline in calorie intake at all expenditure levels. Once again the Engel curve is used as a guiding framework for the empirical analysis and once again there are changes in consumption patterns that are not explained by movements in prices and income alone. In this case the ``cost'' of calories is represented by the role of calories (as opposed to other food attributes) in satisfying household caloric requirements. Using data on time-use to impute caloric requirements and combining this with data on ownership of labor-saving durables, we find support for the hypothesis that a decline in energy requirements has had an important impact on variation in calorie intake over time and space, explaining most of the rural-urban discrepancy in calorie intake but only a modest share of the decline in calorie intake over time.
In the third essay I examine product variety from the point of view of retailers rather than consumers, showing that differences in variety across different stores of a North American grocery retailer have large impacts on consumer welfare. I argue that these differences in variety can be largely attributed to differences in store size and international borders, and provide a stylized partial equilibrium model to analyze what factors influence the retailer's choice of store size in different locations. I find empirical support for the predictions of the model, with larger markets (higher income per capita, higher population density) leading to larger store size and variety while greater competition reduces store size and variety, with significant impacts on consumer welfare across different geographic areas.