Pass-through of subsidies to prices under limited competition: Evidence from Canada’s Nutrition North program

Nicholas Li () and Tracey Galloway ()
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Nicholas Li: Department of Economics, Toronto Metropolitan University, Toronto, Canada
Tracey Galloway: Department of Anthropology, University of Toronto, Mississauga, Canada

No 85, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: We study the pass-through of Canada’s Nutrition North food subsidy in remote, mainly Indigenous communities with limited competition. Reforms to the program in 2016 and 2019 provide exogenous changes in retailer marginal costs and we show that on average, retail prices were lowered by 67 cents for every additional dollar of subsidy, well below the full pass-through expected under perfect competition. We can precisely characterize the competitive environment for each community, which is typically a retail monopoly or duopoly, and find that the low average pass-through is mostly driven by monopoly communities. Our findings show that resources intended for marginalized communities can be partly captured by local firms with market power.

Keywords: pass-through; Subsidies; retail; Competition; monopoly; prices; Canada; Nutrition; North (search for similar items in EconPapers)
JEL-codes: F14 H20 H22 L11 L12 L13 L81 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2023-08
New Economics Papers: this item is included in nep-agr, nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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