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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

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Tariff pass-through is a vital issue for considering who and to what extent the trade liberalization benefits. This paper empirically examines the tariff pass-through in wholesaling by employing the wholesale firm-level data in Japan. We found that importing wholesalers significantly raised their margin ratio (i.e., (sales – procurements) / sales) against tariff reduction. On average, a 1% reduction of tariffs raised the margin ratio by around 0.25 percentage point. This rise is equivalent to the rise of sales prices to procurement prices by around 0.34%. For comparison purposes, we also analyzed tariff pass-through for the import and consumer prices and found that a 1% reduction of tariffs raised import prices (export prices for exporters) by 0.49% and decreased consumer prices by 0.08%. In sum, wholesalers in importing country enjoy the smaller part of tariff rent than producers in exporting country but the larger part than consumers in importing country.

New Economics Papers: this item is included in nep-int and nep-opm
Date: 2019-08
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