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How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences

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  • Rik Chakraborti

    (Christopher Newport University)

  • Gavin Roberts

    (Weber State University)

Abstract

Despite long-standing criticisms, restrictions on price increases during emergencies remain widespread in the US. Criticisms most often cite the social costs of the shortages, but, we have found another, as yet unknown, cost: price-gouging regulations increased social contact during the onset of the COVID-19 pandemic. During the pandemic, thirty-four US states declared emergencies, which activated their preexisting price-gouging regulations, and eight others introduced new regulation along with their emergency declarations. Because these states border eight others that also declared emergencies, but had no price-gouging regulations, this created a unique natural experiment. Exploiting the pandemic-induced variation in regulation, and cellphone mobility data, we find that price controls increased visits to, and social contact in, commercial spaces, presumably because the regulation-induced shortages forced consumers to visit more stores and come in contact with more people as they struggled to find what they needed. This, of course, undermines social distancing efforts.

Suggested Citation

  • Rik Chakraborti & Gavin Roberts, 2023. "How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences," Public Choice, Springer, vol. 196(1), pages 51-83, July.
  • Handle: RePEc:kap:pubcho:v:196:y:2023:i:1:d:10.1007_s11127-023-01054-z
    DOI: 10.1007/s11127-023-01054-z
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    Cited by:

    1. J. Brandon Bolen & Gregory Elliehausen & Thomas W. Miller, 2023. "Credit for me but not for thee: the effects of the Illinois rate cap," Public Choice, Springer, vol. 197(3), pages 397-420, December.

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    More about this item

    Keywords

    Price gouging; Regulation; Shortages; Social contact; Search; COVID-19;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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