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Dissecting the Impact of Imports from Low-Wage Countries on French Consumer Prices

Juan Carluccio, Erwan Gautier () and Sophie Guilloux-Nefussi ()

Working papers from Banque de France

Abstract: We provide a quantitative assessment of the impact of imports from low-wage countries (LWCs) on CPI inflation in France during 1994-2014, using detailed micro data on imports and exports. The share of imports from low-wage countries in consumption increased from about 2% to 7%, and resulted in a negative impact on CPI inflation of about 0.17 pp per year on average. This effect decomposes in three channels. 1) The substitution channel, capturing the replacement of domestic production by goods from LWCs, accounts for almost -0.05 pp. 2) The rise in the proportion of LWC goods in total imports weighed down on imported inflation. This channel reduced French CPI inflation by 0.06 pp per year. 3) Instrumental variable estimation of the competition channel at the product level shows that the increase in the market share of LWCs in French expenditures led to a negative effect of 0.06 pp on CPI inflation.

Keywords: inflation; low-wage countries; imports; globalization; price index; consumers. (search for similar items in EconPapers)
JEL-codes: E31 F62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:672

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