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

Author

Listed:
  • Juan Carluccio
  • Erwan Gautier
  • Sophie Guilloux-Nefussi

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.

Suggested Citation

  • Juan Carluccio & Erwan Gautier & Sophie Guilloux-Nefussi, 2018. "Dissecting the Impact of Imports from Low-Wage Countries on French Consumer Prices," Working papers 672, Banque de France.
    • Handle: RePEc:bfr:banfra:672
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    References listed on IDEAS

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    Cited by:

    1. Giordano, Claire & Lopez-Garcia, Paloma, 2019. "Firm heterogeneity and trade in EU countries: a cross-country analysis," Occasional Paper Series 225, European Central Bank.

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    More about this item

    Keywords

    inflation; low-wage countries; imports; globalization; price index; consumers.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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