Welfare Costs of Shopping Trips

Abstract

Using data on the number of visitors at the store level, this paper investigates the welfare costs of traditional shopping-trips for the U.S. census blocks. The investigation is based on an economic model, where individuals living in census blocks decide on which store to shop from based on the corresponding shopping-trip costs and idiosyncratic benefits. The implications of the model suggest that the welfare gains from removing shopping-trip costs in percentage terms can be measured for each census block as the weighted average of log distance measures between shopping stores and census blocks. The corresponding results show that the welfare gains from removing shopping-trip costs is about 4% for the average census block, with a range between 0.021% and 18% across census blocks that is further connected to their demographic or socioeconomic characteristics. Certain practical policy implications follow regarding how shopping-trip costs can be reduced to achieve higher welfare gains.