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The Great East Japan Earthquake and its Short-run Effects on Household Purchasing Behavior

The powerful earthquake that hit Japan on March 11, 2011, not only devastated the northeastern region but also affected millions of firms and households in east Japan. In particular, immediately after the earthquake, consumers reportedly faced severe commodity shortages caused by a sudden increase in demand as well as major supply disruptions. Although anecdotal evidence abounds, we know very little about the actual effects of the earthquake on prices and expenditures. Did prices rise in response to the excess demand? To what extent, did consumers engage in hoarding? Did the commodity shortages create any discrepancy between those consumers who were able to stockpile goods and those who could not? In this paper, using high-frequency commodity-level micro panel data, we investigate the effects of the 3/11 disaster on commodity prices and household purchasing behaviors in the areas not directly damaged. We find that store-level commodity prices increased surprisingly little after March 11, which implies that the excess demand was resolved mainly through quantity adjustments. We also find that, while the average household expenditure on storable goods rose sharply after the earthquake, the households with higher opportunity costs of shopping (i.e., households with an infant or a wife working fulltime) did not increase expenditures as much. If these households were indeed "rationed out," then our results indicate important heterogeneity across households in their consumption after the disaster. * The authors would like to thank Hidehiko Ichimura, Daiji Kawaguchi, Andrew Leicester, Makoto Saito, and seminar and conference participants at University of Tokyo, Osaka University, and Hitotsubashi University for their helpful comments and discussions. Financial support from JSPS Grants-in Aid for Young Scientists (S) 21673001 is gratefully acknowledged.