2022/29 LEM Working Paper Series

The Expansion of Global Consumption Diversity and the Rise of Niche Consumption

Andreas Chai, Elena Stepanova and Alessio Moneta
Spending diversity; economic development; income elasticity; economic complexity.

  JEL Classifications
D12, D83, J15, O12
Economic growth stimulates fundamental changes in consumption patterns, as consumers who get rich tend to spread their spending more evenly across a wider variety of goods and services. This diversification process magnifies the heterogeneity of spending patterns across the population of consumers within each country, as well as across countries. We empirically track how global consumption patterns grow more diverse as economies develop using entropy measures and show how different stages of economic development are characterized by major shifts in the distribution of final demand across goods and services. We study how this process exhibits path dependence and how economic growth stimulates increases in demand heterogeneity via rising income inequality on the macro level and rising household income on the micro level.
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