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Pass-through of Trade Costs to U.S. Import Prices

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  • Hakan Yilmazkuday

    () (Department of Economics, Florida International University)

Abstract

This paper measures the pass-through of trade costs into U.S. import prices by using actual data on duties/tariffs and freight-related costs. The key innovation is to decompose the indirect effects of trade costs (on prices) into the effects on markups, quality and productivity while measuring/interpreting the pass-through of trade costs into welfare. Robust to the consideration of variable versus constant markups, there is evidence for incomplete pass-through, mostly due to the negative indirect effects of trade costs on marginal costs, suggesting that lower trade costs are associated with imports that have higher marginal costs; markups are affected relatively less. When the effects of trade costs on marginal costs are further decomposed into their components, the positive contribution of quality dominates in all cases, followed by the negative effects of productivity, suggesting that lower trade costs are associated with higher-quality imports that have been produced with lower productivity.

Suggested Citation

  • Hakan Yilmazkuday, 2015. "Pass-through of Trade Costs to U.S. Import Prices," Working Papers 1501, Florida International University, Department of Economics.
  • Handle: RePEc:fiu:wpaper:1501
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    References listed on IDEAS

    as
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Pass-through of Trade Costs to U.S. Import Prices
      by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog on 2016-11-17 00:18:00

    Citations

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    Cited by:

    1. Hakan Yilmazkuday, 2017. "A Solution to the Missing Globalization Puzzle by Non-CES Preferences," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 649-676, August.
    2. Liu, Yue, 2016. "Price dispersion across countries and the heterogeneous impacts of income differences," Economics Letters, Elsevier, vol. 140(C), pages 64-67.
    3. Yilmazkuday, Hakan, 2016. "Constant versus variable markups: Implications for the law of one price," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 154-168.

    More about this item

    Keywords

    Pass-through; Trade Costs; Variable Markups; Quality; Productivity.;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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