Trade Intermediaries and the Tariff Pass-through

P. Lelio Iapadre () and Giuseppe Pace
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P. Lelio Iapadre: University of L’Aquila
Giuseppe Pace: University of L’Aquila

Journal of Industry, Competition and Trade, 2016, vol. 16, issue 4, No 3, 454 pages

Abstract: Abstract This paper aims at improving our understanding of the price effects of trade policies following two perspectives. First, we wish to study how the role of intermediaries in international trade affects the transmission of tariff changes to domestic prices. Second, we explore how our results are influenced by the degree of competition in the distribution-service market. In a Cournot oligopoly-oligopsony model, we show how the pass-through of tariff cuts to domestic prices is limited by the market power of intermediaries producing distribution services. Our long-run equilibrium is characterized by a larger number of firms selling at a higher mark-up. Market access barriers in distribution services determine to what extent tariff cuts are transferred to domestic consumers and foreign producers, affecting the size of their welfare effects. The benefits of trade liberalization policies can be better achieved if they are complemented by competition enhancing measures in the intermediation sector.

Keywords: Cournot oligopoly; Oligopsony; Trade liberalization; Tariff pass-through; Distribution services (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10842-016-0228-x

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