Income Inequality and Product Variety: Empirical Evidence

Publication: Working/Discussion PaperWorking Paper/Preprint


This article investigates the relationship between income inequality and firms’ locations andproduct choices. Using detailed information on income at a regionally disaggregated level andindividual data on Austrian restaurants, we demonstrate that firm conduct crucially depends on the distribution (in addition to the level) of income. Local markets with higher income inequality are characterized by a larger number of firms, offering a broader range of products and product variants that are on average less common. These findings indicate that local demand is substantially influenced by the heterogeneity in consumers’ income endowments, resulting in large differences in product variety.
Original languageEnglish
Publication statusPublished - 2020

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 211
  • 502013 Industrial economics
  • 502034 Regulatory economics

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