Geography and Market Outcomes
Saturday, Jan. 5, 2019 12:30 PM - 2:15 PM
- Chair: Judith Chevalier, Yale University
How School Lunch Crowds out the Local Grocer: Evidence from the Community Eligibility Provision
AbstractWe study the effect of school lunch provision on local business under the 2010 Healthy, Hunger-Free Kids Act. The act introduced a Community Eligibility Provision (CEP), where schools are reimbursed for meals served to all students, not just those served to students who qualify on an individual basis. Schools may adopt CEP if at least 40% of students participate in other means-tested welfare programs. We exploit the discontinuity in CEP eligibility for estimation, find that state adoption of CEP leads to an 8% decline in grocery sales.
Food Deserts and the Causes of Nutritional Inequality
AbstractWe study the causes of "nutritional inequality": why the wealthy eat more healthfully than
the poor in the United States. Exploiting supermarket entry, household moves to healthier neighborhoods, and purchasing patterns among households with identical local supply, we reject that
neighborhood environments contribute meaningfully to nutritional inequality. Using a structural
demand model, we find that exposing low-income households to the same products and prices
available to high-income households reduces nutritional inequality by only nine percent, while the
remaining 91 percent is driven by differences in demand. These findings counter the common notion
that policies to reduce supply inequities, such as "food deserts," could play an important role
in reducing nutritional inequality. By contrast, the structural results predict that means-tested
subsidies for healthy food could eliminate nutritional inequality at a scale cost of about 15 percent
of the annual budget for the U.S. Supplemental Nutrition Assistance Program.
Economies of Density in E-commerce: A Study of Amazon's Fulfillment Center Network
AbstractWe examine the economies of density associated with the expansion of Amazon’s distribution network from 2006 to 2018. We demonstrate that, in placing a fulfillment center in a new state, Amazon faces a trade-off between the revenue implications of exposing local customers to sales tax on their purchases and the cost savings from reducing the shipping distance to those customers. Using detailed data on online transactions, we estimate a model of demand for retail goods and show that consumers’ online shopping is sensitive to sales taxes. We then use the demand estimates and the spatial distribution of consumers relative to Amazon’s fulfillment centers to predict revenues and shipping distances under the observed fulfillment center roll-out and under counterfactual roll-outs over this time period. Using a moment inequalities approach, we infer the cost savings from being closer to customers that render the observed network roll-out optimal. We find that Amazon saves between $0.17 and $0.47 for every 100-mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.
- L1 - Market Structure, Firm Strategy, and Market Performance
- L2 - Firm Objectives, Organization, and Behavior