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

         
Author Name Youngmin BAEK (Waseda University) / HAYAKAWA Kazunobu (Institute of Developing Economies) / TSUBOTA Kenmei (Institute of Developing Economies) / URATA Shujiro (Faculty Fellow, RIETI) / YAMANOUCHI Kenta (Keio University)
Creation Date/NO. August 2019 19-E-064
Research Project A Study of the Effects of Trade Policy: A microdata analysis of Japan from the 1990s to 2010s
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Abstract

Tariff pass-through is a vital issue for considering who and to what extent the trade liberalization benefits. This paper empirically examines the tariff pass-through in wholesaling by employing the wholesale firm-level data in Japan. We found that importing wholesalers significantly raised their margin ratio (i.e., (sales – procurements) / sales) against tariff reduction. On average, a 1% reduction of tariffs raised the margin ratio by around 0.25 percentage point. This rise is equivalent to the rise of sales prices to procurement prices by around 0.34%. For comparison purposes, we also analyzed tariff pass-through for the import and consumer prices and found that a 1% reduction of tariffs raised import prices (export prices for exporters) by 0.49% and decreased consumer prices by 0.08%. In sum, wholesalers in importing country enjoy the smaller part of tariff rent than producers in exporting country but the larger part than consumers in importing country.