Subsidies and heterogeneous pass-through: Evidence from Nutrition North Canadaâ€™s product-level price data Abstract: Nutrition North Canada pays subsidies to retailers to offset freight costs for specified foods shipped to remote, mainly Indigenous communities on the condition that retailers pass these subsidies on to consumers. We build on our previous analysis (Galloway and Li, 2023) using confidential product- and store-level data to assess pass-through. Taking measurement issues seriously and using several identification strategies, we conclude that pass-through of subsidy rate increases into prices is incomplete for our sample overall, but document substantial heterogeneity in pass-through across retailers, regions, product categories, and over time. We find that larger subsidy changes, like the May 2020 subsidy increases, tend to result in higher pass-through, that low pass-through is often driven by sticky prices, and that subsidy pass-through is correlated with pass-through of national price changes across products and stores; we interpret these as suggestive evidence that incomplete pass-through is shaped by retailers balancing regulatory compliance with normal economic incentives

Li, Nicholas; Galloway, Tracey

Subsidies and heterogeneous pass-through: Evidence from Nutrition North Canadaâ€™s product-level price data Abstract: Nutrition North Canada pays subsidies to retailers to offset freight costs for specified foods shipped to remote, mainly Indigenous communities on the condition that retailers pass these subsidies on to consumers. We build on our previous analysis (Galloway and Li, 2023) using confidential product- and store-level data to assess pass-through. Taking measurement issues seriously and using several identification strategies, we conclude that pass-through of subsidy rate increases into prices is incomplete for our sample overall, but document substantial heterogeneity in pass-through across retailers, regions, product categories, and over time. We find that larger subsidy changes, like the May 2020 subsidy increases, tend to result in higher pass-through, that low pass-through is often driven by sticky prices, and that subsidy pass-through is correlated with pass-through of national price changes across products and stores; we interpret these as suggestive evidence that incomplete pass-through is shaped by retailers balancing regulatory compliance with normal economic incentives

Nicholas Li () and Tracey Galloway ()
Additional contact information
Nicholas Li: Department of Economics, Toronto Metropolitan University, Toronto, Canada
Tracey Galloway: Department of Anthropology, University of Toronto, Toronto, Canada

No 97, Working Papers from Toronto Metropolitan University, Department of Economics

Keywords: pass-through; retail; pricing; subsidy; nutrition; north; Canada; competition (search for similar items in EconPapers)
JEL-codes: D22 H23 L11 Q18 R12 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2025-12
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