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Distribution services and differential producer and consumer price impacts of trade

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  • Francois, Joseph
  • Manchin, Miriam
  • Norberg, Hanna

Abstract

We examine the differential impact of import prices on consumer and producer prices. This includes an analytical decomposition of factors, like distribution costs, oligopoly markups, and distribution sector market power that contribute to variations in pass-through. Differences between consumer and producer price pass-through is evidence of market power in the trade and distribution sector. We then examine these relationships in the euro-zone Members for the period 1996-2006. This sample is characterized by a common trade policy and identical exchange rate changes, as well as a well-integrated set of markets at the industry level with relatively segmented trade and distribution sectors. We quantify the transmission of border price changes, from both tariff changes and exchange rate movements, into both European producer prices and consumer prices. There is substantially more impact on European producer prices than on consumer prices. The degree of consumer price impact varies substantially across countries and products. Part of this variation in pass-through is linked to market structure in the retail and distribution sectors.

Suggested Citation

  • Francois, Joseph & Manchin, Miriam & Norberg, Hanna, 2010. "Distribution services and differential producer and consumer price impacts of trade," Conference papers 331942, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331942
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    References listed on IDEAS

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    2. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    3. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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