Does reducing white space improve or degrade the user experience?

As a web designer, I work on a lot of ecommerce websites. One piece of feedback that comes in time and time again, is to make vertical spacing smaller, not only to get more products above the fold, but to decrease the amount of scrolling down the page.

I personally like to use a lot of white space to give content lots of room to breathe, I don't like when the design is too cramped up. Please see an example below of the spacing I like to use, and the spacing the client likes to use. Click to enlarge them and make sure to view at 100% for comparison.

My spacing (click to enlarge)

Clients spacing (click to enlarge)

My question then is, does reducing white space improve or degrade user experience in any way? If you can site studies this will be even better.

I would like to add: 9.5% of people are still using the resolution 1024 x 768 or lower. This is the one possibility I see where less white space may be useful, as it when I resize my browser to 1024 x 768, having more of the products showing does feel more comfortable.
Source: http://www.w3schools.com/browsers/browsers_display.asp