Targeted Price Controls on Supermarket Products

Alberto  Cavallo; Diego  Aparicio

Article | Review of Economics and Statistics | Forthcoming

Targeted Price Controls on Supermarket Products

Abstract

We study the impact of targeted price controls for supermarket products in Argentina from 2007 to 2015. Using web scraping, we collected daily prices for controlled and non-controlled goods and measured the differential effects on inflation, product availability, and price dispersion. We first show that, although price controls are imposed on goods with significant CPI weight, they have a temporary effect on aggregate inflation and no downward effect on other goods. Second, contrary to common beliefs, we find that controlled goods are consistently available for sale. Third, firms compensate for price controls by introducing new product varieties at higher prices. This behavior, which increases price dispersion within narrow categories, is consistent with a standard vertical differentiation model in the presence of price controls.

Keywords: prices; controls; price dispersion; Economics; Price; Cost Management; Goods and Commodities; Retail Industry; Argentina;

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Citation:

Cavallo, Alberto, and Diego Aparicio. "Targeted Price Controls on Supermarket Products." Review of Economics and Statistics (forthcoming).

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Data and Replication Files

The data and code needed to replicate the results in this paper are available on Harvard University's Dataverse

Case | HBS Case Collection | May 2020 (Revised June 2020)

The Coronavirus (COVID-19) Pandemic and the Global Economy (A)

Alberto Cavallo and Christian Godwin

In April 2020, the world struggled to contain the exponential escalation of the coronavirus (COVID-19) pandemic. Dozens of countries had imposed restrictions on travel, work, and social gatherings. A large share of the global population was under lockdowns and unprecedented supply and demand disruptions crippled the economy. In response, central banks announced massive lending programs to avoid a financial meltdown, and governments were launching unprecedented fiscal packages designed to contain the collapse. In a matter of weeks, the pandemic turned into one of the worst global economic crises since the Great Depression. As governments struggled to make policy decisions, uncertainty and tensions were rising. How to balance the public health and economic concerns? What would be the economic and political consequences of the policy response? Was this the end of globalization, or the beginning of a new era of international cooperation? The only certainty was that some of the hardest choices still lay ahead.

Keywords: Demand and Consumers; Supply and Industry; Finance; Central Banking; Financial Markets; International Finance; Globalization; Government and Politics; Health Pandemics; Decision Making; Macroeconomics; Employment; Crisis Management; Supply Chain; Risk and Uncertainty; Air Transportation Industry; Banking Industry; Consumer Products Industry; Employment Industry; Financial Services Industry; Food and Beverage Industry; Health Industry; Medical Devices and Supplies Industry; Pharmaceutical Industry; Public Administration Industry; Retail Industry; Service Industry; Shipping Industry; Tourism Industry; Travel Industry; Asia; China; Europe; Latin America; Africa; United States;

Citation:

Cavallo, Alberto, and Christian Godwin. "The Coronavirus (COVID-19) Pandemic and the Global Economy (A)." Harvard Business School Case 720-031, May 2020. (Revised June 2020.) View Details

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The Covid-19 Pandemic has led to changes in consumer expenditure patterns that can introduce significant bias in the measurement of CPI inflation. I use data collected from credit and debit transactions in the US to update the official basket weights. I find that the Covid inflation rate is higher for both headline and core CPIs, particularly for low-income households. I find similar results in 12 of 17 additional countries. The difference is growing over time as consumers spend relatively more on food and categories with rising inflation, and relatively less on transportation and categories experiencing significant deflation.

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Targeted Price Controls on Supermarket Products

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