We construct a model of trade with heterogeneous retailers to examine the effects of trade liberalization on retail market structure, imports and social welfare. We are especially interested in studying the degree of pass-through of import into retail prices and the effects of retail market regulation. The paper shows that the degree of pass-through may be large when market structure effects are taken into account, and that restrictions on retailing may have significant effects on imports and the degree of pass-through. The paper helps explain the apparent discrepancy between the low observed degree of pass-through and the large benefit that consumers seem to derive from trade liberalization
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1556.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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