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Tariff Pass‐Through and Welfare in the Tablet Computer Market

Scott Hiller () and Scott Savage ()

Journal of Industrial Economics, 2021, vol. 69, issue 2, 369-409

Abstract: This paper estimates short‐run effects of tariffs on United States tablet prices and welfare. Market data are used to estimate a model of demand and supply and to simulate prices and sales in scenarios with tariffs. A 25 per cent tariff on firms assembling in China results in tariff elasticity of tablet prices for taxed firms of 1.108, a 29.6 per cent decline in profits, and a deadweight loss of 28.8 per cent. Firms assembling elsewhere benefit from the reduction in rivals’ competitiveness. Long‐run implications are that firms may decide to shift production from ‘uncompetitive’ facilities in China to countries that are politically favored.

Date: 2021
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