Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh

M. Shahe Emran, Dilip Mookherjee, Forhad Shilpi and M. Helal Uddin

No 26615, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We extend standard models of price pass-through in an imperfectly competitive supply chain to incorporate rationing of trade credit. Credit rationing reverses predictions concerning effects of raw material import prices on pass-through to wholesale prices, and effects of regulations of intermediaries. To test these we study the effects of a policy in Bangladesh's edible oils supply chain during 2011-12 banning a layer of financing intermediaries. Evidence from a difference-in-difference estimation rejects the standard model. We find that the regulatory effort to reduce market power of financing intermediaries ended up raising consumer prices by restricting access to credit of downstream traders.

JEL-codes: L13 O12 Q13 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-agr
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Published as M. Shahe Emran & Dilip Mookherjee & Forhad Shilpi & M. Helal Uddin, 2021. "Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 202-236, July.

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Related works:
Journal Article: Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh (2021)
Working Paper: Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh (2020)
Working Paper: Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh (2017)
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