Recent papers have tried to explain incomplete pass-through observed at the aggregate level by various microeconomic behaviors. This paper assesses some of these explanations, using product-level estimates of pricing-to-market coefficients obtained from a new database of bilateral international trade that covers more than 5,000 products and 130 countries. Half of the industries are found to exhibit pricing-to-market, but the magnitude of the pass-through is shown to vary widely across sectors, even at the most detailed level. Pricing-to-market is then shown to be higher in markets where arbitrage is made easier by the existence of referenced prices, and for final consumption goods. Moreover, competitive pressures faced by exporting firms are shown to affect pass-through decisions as well: firms tend to price to market all the less that their market share in the destination market is large, and that the destination markets are small or concentrated.
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Paper provided by CEPII research center in its series Working Papers with number
2006-03.
Find related papers by JEL classification: F1 - International Economics - - Trade F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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