IDEAS home Printed from https://ideas.repec.org/a/eee/jjieco/v62y2021ics0889158321000435.html
   My bibliography  Save this article

Tariff Pass-through in Wholesaling: Evidence from Firm-level Data in Japan✰

Author

Listed:
  • Baek, Youngmin
  • Hayakawa, Kazunobu
  • Tsubota, Kenmei
  • Urata, Shujiro
  • Yamanouchi, Kenta

Abstract

Tariff pass-through is critical for considering the benefits of trade liberalization, the beneficiaries, and the extent. This study empirically examines the tariff pass-through in wholesaling through the wholesale firm-level data in Japan. In particular, the study focuses on wholesalers’ margin ratio, that is, (sales – procurements) / sales. We address the endogeneity concerns on the measurement errors of the study variables of margin ratio and tariffs. Consequently, the study found that importing wholesalers significantly raised their margin ratio against tariff reduction. On average, a 1 percentage point reduction of tariffs raised the margin ratio by approximately 0.25 percentage point. This rise is equivalent to that of sales prices to procurement prices by about 0.34 %, indicating that Japanese wholesalers capture one-third of the tariff rent. However, the study also found that a tariff reduction lowers the margin ratio of wholesalers who procure their products from domestic producers.

Suggested Citation

  • Baek, Youngmin & Hayakawa, Kazunobu & Tsubota, Kenmei & Urata, Shujiro & Yamanouchi, Kenta, 2021. "Tariff Pass-through in Wholesaling: Evidence from Firm-level Data in Japan✰," Journal of the Japanese and International Economies, Elsevier, vol. 62(C).
  • Handle: RePEc:eee:jjieco:v:62:y:2021:i:c:s0889158321000435
    DOI: 10.1016/j.jjie.2021.101164
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0889158321000435
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jjie.2021.101164?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Meinen, Philipp & Raff, Horst, 2018. "International trade and retail market performance and structure: Theory and empirical evidence," Journal of International Economics, Elsevier, vol. 115(C), pages 99-114.
    2. Mi Dai & Francesco Nucci & Alberto Franco Pozzolo & Jianwei Xu, 2019. "Access to Finance and the Exchange Rate Sensitivity of Exports," Development Working Papers 442, Centro Studi Luca d'Agliano, University of Milano.
    3. Emi Nakamura & Dawit Zerom, 2010. "Accounting for Incomplete Pass-Through," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 1192-1230.
    4. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, vol. 79(2), pages 222-229, November.
    5. Horst Raff & Nicolas Schmitt, 2016. "Manufacturers and retailers in the global economy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 685-706, May.
    6. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2010. "Wholesalers and Retailers in US Trade," American Economic Review, American Economic Association, vol. 100(2), pages 408-413, May.
    7. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    8. Cole, Matthew T. & Eckel, Carsten, 2018. "Tariffs and markups in retailing," Journal of International Economics, Elsevier, vol. 113(C), pages 139-153.
    9. Joseph Francois & Ian Wooton, 2010. "Market Structure and Market Access," The World Economy, Wiley Blackwell, vol. 33(7), pages 873-893, July.
    10. Ito, Tadashi & Aoyagi, Takahide, 2019. "Did the least developed countries benefit from duty-free quota-free access to the Japanese market?," Japan and the World Economy, Elsevier, vol. 49(C), pages 32-39.
    11. E. Baldwin, Richard & Ito, Tadashi, 2011. "Quality Competition Versus Price Competition Goods: An Empirical Classification," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 110-135.
    12. Alberto Cavallo & Gita Gopinath & Brent Neiman & Jenny Tang, 2021. "Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy," American Economic Review: Insights, American Economic Association, vol. 3(1), pages 19-34, March.
    13. Won Chang & L. Alan Winters, 2015. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," World Scientific Book Chapters, in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 11, pages 199-214, World Scientific Publishing Co. Pte. Ltd..
    14. Horst Raff & Nicolas Schmitt, 2012. "Imports and the structure of retail markets," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1431-1455, November.
    15. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    16. Eric Anderson & Sergio Rebelo & Arlene Wong, 2018. "Markups Across Space and Time," NBER Working Papers 24434, National Bureau of Economic Research, Inc.
    17. Sushanta Mallick & Helena Marques, 2008. "Passthrough of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalization," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 765-782, September.
    18. Rezitis, Anthony N. & Brown, A. Blake, 1999. "Pass-through of exchange rates and tariffs in Greek-US tobacco trade," Agricultural Economics, Blackwell, vol. 21(3), pages 269-277, December.
    19. Han, Jun & Liu, Runjuan & Ural Marchand, Beyza & Zhang, Junsen, 2016. "Market structure, imperfect tariff pass-through, and household welfare in Urban China," Journal of International Economics, Elsevier, vol. 100(C), pages 220-232.
    20. Alexis Antoniades & Nicola Zaniboni, 2016. "Exchange Rate Pass‐Through Into Retail Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(4), pages 1425-1447, November.
    21. Çaglar Özden & Gunjan Sharma, 2006. "Price Effects of Preferential Market Access: Caribbean Basin Initiative and the Apparel Sector," The World Bank Economic Review, World Bank Group, vol. 20(2), pages 241-259.
    22. Bernard, Andrew B. & Jensen, J. Bradford & Redding, Stephen & Schott, Peter K., 2010. "Wholesalers and retailers in U.S. trade (Long Version)," LSE Research Online Documents on Economics 48896, London School of Economics and Political Science, LSE Library.
    23. Ludema, Rodney D. & Yu, Zhi, 2016. "Tariff pass-through, firm heterogeneity and product quality," Journal of International Economics, Elsevier, vol. 103(C), pages 234-249.
    24. Xavier Cirera, 2014. "Who captures the price rent? The impact of European Union trade preferences on export prices," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(3), pages 507-527, August.
    25. Ural Marchand, Beyza, 2012. "Tariff pass-through and the distributional effects of trade liberalization," Journal of Development Economics, Elsevier, vol. 99(2), pages 265-281.
    26. Alexis Antoniades & Nicola Zaniboni, 2016. "Exchange Rate Pass‐Through Into Retail Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 1425-1447, November.
    27. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
    28. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity (DOI:10.111/j.1467-937x.2007.00463.x)," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 985-985.
    29. Hellerstein, Rebecca, 2008. "Who bears the cost of a change in the exchange rate? Pass-through accounting for the case of beer," Journal of International Economics, Elsevier, vol. 76(1), pages 14-32, September.
    30. Nicita, Alessandro, 2009. "The price effect of tariff liberalization: Measuring the impact on household welfare," Journal of Development Economics, Elsevier, vol. 89(1), pages 19-27, May.
    31. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    32. Bart van Ark & Erik Monnikhof, 1996. "Size Distribution of Output and Employment: A Data Set for Manufacturing Industries in Five OECD Countries, 1960s-1990," OECD Economics Department Working Papers 166, OECD Publishing.
    33. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494, Elsevier.
    34. Martin Richardson, 2017. "Trade Policy and Access to Retail Distribution," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 12, pages 243-262, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. KIKUCHI Shinnosuke & Daniel G. O'CONNOR, 2024. "The Granular Origins of Agglomeration," Discussion papers 24005, Research Institute of Economy, Trade and Industry (RIETI).
    2. HAYAKAWA Kazunobu & URATA Shujiro & YAMANOUCHI Kenta, 2022. "Import Competition from China and Markup Dispersion," Discussion papers 22031, Research Institute of Economy, Trade and Industry (RIETI).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Youngmin BAEK & HAYAKAWA Kazunobu & TSUBOTA Kenmei & URATA Shujiro & YAMANOUCHI Kenta, 2019. "Tariff Pass-through in Wholesaling: Evidence from Firm-level Data in Japan," Discussion papers 19064, Research Institute of Economy, Trade and Industry (RIETI).
    2. Cole, Matthew T. & Eckel, Carsten, 2018. "Tariffs and markups in retailing," Journal of International Economics, Elsevier, vol. 113(C), pages 139-153.
    3. Hayakawa, Kazunobu & Ito, Tadashi & Mukunoki, Hiroshi, 2022. "Lerner meets Metzler: Tariff pass-through of worldwide trade," Journal of the Japanese and International Economies, Elsevier, vol. 63(C).
    4. Hayakawa, Kazunobu, 2017. "Asymmetric tariff pass-through to trade prices," IDE Discussion Papers 631, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Horst Raff & Nicolas Schmitt, 2012. "Imports and the structure of retail markets," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1431-1455, November.
    6. Meinen, Philipp & Raff, Horst, 2018. "International trade and retail market performance and structure: Theory and empirical evidence," Journal of International Economics, Elsevier, vol. 115(C), pages 99-114.
    7. Idrisov, Georgy (Идрисов, Георгий) & Ponomarev, Yury (Пономарев, Юрий) & Pleskachev, Yury Andreevich (Плескачев, Юрий Андреевич), 2016. "Analysis of Joint Exchange Rate Pass-Through and Import Duty Rates in the Russian Economy [Анализ Совместного Эффекта Переноса Обменного Курса И Ввозных Пошлин В Цены В Российской Экономике]," Working Papers 1666, Russian Presidential Academy of National Economy and Public Administration.
    8. Raff, Horst & Schmitt, Nicolas, 2015. "Retailing and international trade: A survey of the literature," Economics Working Papers 2015-02, Christian-Albrechts-University of Kiel, Department of Economics.
    9. Lawrence Edwards & Zaakirah Ismail & Godfrey Kamutando & Simbarashe Mambara & Matthew Stern & Fouche, 2022. "TheconsumerpriceeffectsofspecifictradepolicyrestrictionsinSouthAfrica," Working Papers 11036, South African Reserve Bank.
    10. Horst Raff & Nicolas Schmitt, 2016. "Manufacturers and retailers in the global economy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 685-706, May.
    11. Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Hiroshi Mukunoki & Shujiro Urata, 2016. "Impact of Free Trade Agreement Utilisation on Import Prices," Working Papers DP-2016-24, Economic Research Institute for ASEAN and East Asia (ERIA).
    12. Bolatto, Stefano & Grazzi, Marco & Tomasi, Chiara, 2022. "Export modes and firms’ adjustments to exchange rate movements," European Economic Review, Elsevier, vol. 141(C).
    13. Nagengast, Arne J. & Bursian, Dirk & Menz, Jan-Oliver, 2021. "Dynamic pricing and exchange rate pass-through: Evidence from transaction-level data," European Economic Review, Elsevier, vol. 133(C).
    14. Sébastien Houde & Wenjun Wang, 2022. "The Incidence of the U.S.-China Solar Trade War," CER-ETH Economics working paper series 22/372, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    15. Raff, Horst & Schmitt, Nicolas, 2009. "Imports, pass-through, and the structure of retail markets," Kiel Working Papers 1556, Kiel Institute for the World Economy (IfW Kiel).
    16. Raimondos, Pascalis & Woodland, Alan, 2018. "Reciprocity in trade negotiations and welfare," Journal of International Economics, Elsevier, vol. 111(C), pages 134-142.
    17. Hong, Chang & Wu, Haoyu, 2018. "Export spillover and location choice," Journal of the Japanese and International Economies, Elsevier, vol. 49(C), pages 54-68.
    18. Han, Jun & Liu, Runjuan & Ural Marchand, Beyza & Zhang, Junsen, 2016. "Market structure, imperfect tariff pass-through, and household welfare in Urban China," Journal of International Economics, Elsevier, vol. 100(C), pages 220-232.
    19. Everisto Mugocha & Haroon Bhorat, "undated". "Import tariff pass-through effect and the spatial distribution of domestic consumer goods prices: Zimbabwe (2009-2014)," Working Papers 879, Economic Research Southern Africa.
    20. Beyza Ural Marchand, 2017. "How does international trade affect household welfare?," IZA World of Labor, Institute of Labor Economics (IZA), pages 378-378, August.

    More about this item

    Keywords

    Tariff pass-through; Wholesaling; Japan;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jjieco:v:62:y:2021:i:c:s0889158321000435. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622903 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.