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

Listed author(s):
  • Hakan Yilmazkuday

    ()

    (Department of Economics, Florida International University)

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.

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File URL: http://economics.fiu.edu/research/working-papers/2015/1501/1501.pdf
File Function: First version, 2015
Download Restriction: no

Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1501.

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Length: 36 pages
Date of creation: Jan 2015
Handle: RePEc:fiu:wpaper:1501
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Fax: (305) 348-1524
Web page: http://economics.fiu.edu

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  27. repec:pri:cepsud:231deloecker is not listed on IDEAS
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