Targeted Price Controls on Supermarket Products

51 Pages Posted: 28 Sep 2019

See all articles by Diego Aparicio

Diego Aparicio

Massachusetts Institute of Technology (MIT), Department of Economics

Alberto Cavallo

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 2019

Abstract

We study the impact of targeted price controls on supermarket products in Argentina between 2007 and 2015. Using web-scraping methods, we collected daily prices for controlled and non-controlled goods and examined the differential effects of the policy on inflation, product availability, entry and exit, and price dispersion. We first show that price controls have only a small and temporary effect on inflation that reverses itself as soon as the controls are lifted. 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, thereby increasing price dispersion within narrow categories. Overall, our results show that targeted price controls are just as ineffective as more traditional forms of price controls in reducing aggregate inflation.

Keywords: Price dispersion, Inflation

JEL Classification: E31, D22, L11, L81

Suggested Citation

Aparicio, Diego and Cavallo, Alberto, Targeted Price Controls on Supermarket Products (September 2019). Available at SSRN: https://ssrn.com/abstract=3456105 or http://dx.doi.org/10.2139/ssrn.3456105

Diego Aparicio (Contact Author)

Massachusetts Institute of Technology (MIT), Department of Economics ( email )

Cambridge, MA
United States

Alberto Cavallo

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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