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The Effects of Natural Disasters on Prices and Purchasing Behaviors: The Case of the Great East Japan Earthquake

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  • Abe, Naohito
  • Moriguchi, Chiaki
  • Inakura, Noriko

Abstract

The Great East Japan Earthquake in March 2011 not only caused severe damage to the northeastern region, but also affected millions of households beyond the disaster-stricken area. Most notably, the disaster temporarily created large excess demand for many essential goods, resulting in widespread commodity shortages. Did consumers engage in hoarding after the disaster? Did the commodity shortages create any discrepancy between those consumers who were able to stockpile goods and those who could not? In this paper, by using the Great East Japan Earthquake as a natural experiment and taking advantage of unique high-frequency scanner data, we investigate the short-run effects of a major disaster on commodity prices and household purchasing behaviors. We find that commodity prices increased surprisingly little after the disaster, which implies that the excess demand was resolved, not through prices, but through quantity adjustments. Our empirical analysis shows that, while average household expenditure on storable food rose dramatically in response to the disaster, households that had higher opportunity costs of shopping were less likely to stockpile food. Our results indicate substantial heterogeneity in household purchasing behavior in response to a major disaster, which may have important distributional consequences.

Suggested Citation

  • Abe, Naohito & Moriguchi, Chiaki & Inakura, Noriko, 2014. "The Effects of Natural Disasters on Prices and Purchasing Behaviors: The Case of the Great East Japan Earthquake," RCESR Discussion Paper Series DP14-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:rcesrs:dp14-1
    Note: First Draft: October 2012. This Version: September 10, 2014
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    References listed on IDEAS

    as
    1. Ivancic, Lorraine & Erwin Diewert, W. & Fox, Kevin J., 2011. "Scanner data, time aggregation and the construction of price indexes," Journal of Econometrics, Elsevier, vol. 161(1), pages 24-35, March.
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    4. Alberto Cavallo & Eduardo Cavallo & Roberto Rigobon, 2014. "Prices and Supply Disruptions during Natural Disasters," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S2), pages 449-471, November.
    5. Yasuyuki Sawada & Satoshi Shimizutani, 2008. "How Do People Cope with Natural Disasters? Evidence from the Great Hanshin‐Awaji (Kobe) Earthquake in 1995," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2‐3), pages 463-488, March.
    6. Cavallo, Eduardo & Noy, Ilan, 2011. "Natural Disasters and the Economy — A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 5(1), pages 63-102, May.
    7. Batabyal, Amitrajeet A. & DeAngelo, Gregory J., 2012. "Goods allocation by queuing and the occurrence of violence: A probabilistic analysis," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 1-7.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. In Defense of Price ‘Gouging’ (lines and shortages are uneconomic, discriminatory)
      by mgiberson in MasterResource on 2015-01-28 13:00:46
    2. You should probably raise prices a bit during emergencies
      by Michael Giberson in Knowledge Problem on 2015-01-28 23:48:40

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    Cited by:

    1. Miles Parker, 2018. "The Impact of Disasters on Inflation," Economics of Disasters and Climate Change, Springer, vol. 2(1), pages 21-48, April.

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    More about this item

    Keywords

    natural disaster; hoarding; scanner data;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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