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Prices and competition: evidence from a social program

Author

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  • Emilio Aguirre
  • Pablo Blanchard
  • Fernando Borraz
  • Joaquín Saldain

Abstract

We use a micro price dataset for products defined at the universal product code level to analyze the impact on prices of a social program in Uruguay that allows its beneficiaries to purchase food, beverages, and cleaning items exclusively in certain small retailers. We find that an unintended negative consequence is that the beneficiaries pay significantly higher prices to other retailers. We find this result for the whole country except for areas with the highest retailer density in Montevideo’s capital city. We also do not find evidence of price discrimination of stores against program beneficiaries. The participant stores charge the same price to beneficiaries and other customers. For an overall assessment of the program, we find that an unintended consequence of it was a price increase for all customers in capital cities that increased the cost of the program.

Suggested Citation

  • Emilio Aguirre & Pablo Blanchard & Fernando Borraz & Joaquín Saldain, 2022. "Prices and competition: evidence from a social program," International Review of Applied Economics, Taylor & Francis Journals, vol. 36(1), pages 85-101, January.
    • Handle: RePEc:taf:irapec:v:36:y:2022:i:1:p:85-101
    DOI: 10.1080/02692171.2021.1905785
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    1. Matias Busso & Sebastian Galiani, 2019. "The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 33-56, January.
    2. Gibson, John & Kim, Bonggeun, 2013. "Do the urban poor face higher food prices? Evidence from Vietnam," Food Policy, Elsevier, vol. 41(C), pages 193-203.
    3. Fernando Borraz & Leandro Zipitría, 2012. "Retail Price Setting in Uruguay," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 77-109, January.
    4. MacDonald, James M. & Nelson, Paul Jr., 1991. "Do the poor still pay more? Food price variations in large metropolitan areas," Journal of Urban Economics, Elsevier, vol. 30(3), pages 344-359, November.
    5. Kaufman, Phillip R. & MacDonald, James M. & Lutz, Steve M. & Smallwood, David M., 1997. "Do the Poor Pay More for Food? Item Selection and Price Differences Affect Low-Income Household Food Costs," Agricultural Economic Reports 34065, United States Department of Agriculture, Economic Research Service.
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    Cited by:

    1. Ivone Perazzo & Analía Rivero & Andrea Vigorito, 2021. "¿Qué sabemos sobre los programas de transferencias no contributivas en Uruguay? Una síntesis de resultados de investigación disponibles sobre el PANES, AFAM-PE y TUS," Documentos de Trabajo (working papers) 21-33, Instituto de Economía - IECON.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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