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

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.

First Draft: October 2012. This Version: September 10, 2014

Institute of Economic Research, Hitotsubashi University

2014-09-11

English(eng)

technical report

VoR

22

RCESR Discussion Paper Series / Research Center for Economic and Social Risks

https://hdl.handle.net/10086/26845