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Tariff Pass-through in Wholesaling: Evidence from Firm-level Data in Japan✰

Youngmin Baek, Kazunobu Hayakawa, Kenmei Tsubota, Shujiro Urata and Kenta Yamanouchi

Journal of the Japanese and International Economies, 2021, vol. 62, issue C

Abstract: Tariff pass-through is critical for considering the benefits of trade liberalization, the beneficiaries, and the extent. This study empirically examines the tariff pass-through in wholesaling through the wholesale firm-level data in Japan. In particular, the study focuses on wholesalers’ margin ratio, that is, (sales – procurements) / sales. We address the endogeneity concerns on the measurement errors of the study variables of margin ratio and tariffs. Consequently, the study found that importing wholesalers significantly raised their margin ratio against tariff reduction. On average, a 1 percentage point reduction of tariffs raised the margin ratio by approximately 0.25 percentage point. This rise is equivalent to that of sales prices to procurement prices by about 0.34 %, indicating that Japanese wholesalers capture one-third of the tariff rent. However, the study also found that a tariff reduction lowers the margin ratio of wholesalers who procure their products from domestic producers.

Keywords: Tariff pass-through; Wholesaling; Japan (search for similar items in EconPapers)
JEL-codes: F15 F53 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1016/j.jjie.2021.101164

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