The flood that caused a drought

Alex Nikolsko-Rzhevskyy, Oleksandr Talavera*, Nam Vu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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Abstract

To determine how an exogenous supply shock affects product availability, prices, and price-setting behavior, we analyzed a unique dataset representing a natural experiment concerning the 2011 flood in Thailand, which affected the production facilities of Western Digital, the world's largest producer of hard drives. The natural disaster impacted the overseas inventory of hard drives in the United States, where availability declined by more than 40% and price indexes increased by as much as 38%. However, our findings suggest that such supply shocks, when transmitted to either substitute or complementary products, are likely to be absorbed within production networks.

Original languageEnglish
JournalEconomic Inquiry
Early online date31 Mar 2023
DOIs
Publication statusE-pub ahead of print - 31 Mar 2023

Bibliographical note

Funding Information:
Standard disclaimer applies. The authors thank Tho Pham and the participants of the ESCoE Conference on Economic Measurement for valuable comments and suggestions. Any remaining errors are our own. No external funding sources supported this research.

Publisher Copyright:
© 2023 The Authors. Economic Inquiry published by Wiley Periodicals LLC on behalf of Western Economic Association International.

Keywords

  • hard drive
  • inventory
  • natural disaster
  • price stickiness
  • supply shock

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Economics and Econometrics

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