The effects of anti-price gouging laws in the wake of a hurricane

Abstract

The southeastern coast of the United States is vulnerable to hurricanes and the destruction they cause. Previous literature has explored hurricanes' impacts on growth in coastal counties of the United States, but not the inherently linked effects of anti-price gouging (APG) laws, which prohibit firms from significantly increasing prices during a declared state of emergency. The relationship between APG laws and economic growth following a hurricane is estimated with a fixed effect model and county-level quarterly wage data for the period 1990-2012. Results suggest that hurricane-stricken counties are worse off in the presence of APG laws, with the most pronounced negative effects in the accommodations industry. The deleterious effects of APG laws, however, are short-lived; affected counties appear to rebound once the laws are no longer in effect. As the first paper to empirically examine the economic effects of APG laws, these results counter common political thinking and provide empirical support of standard economic theory regarding price ceilings.