Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142371
Authors: 
Ganapati, Sharat
Shapiro, Joseph S.
Walker, Reed
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 9932
Abstract: 
This paper studies how increases in energy input costs for production are split between consumers and producers via changes in product prices (i.e., pass-through). We show that in markets characterized by imperfect competition, marginal cost pass-through, a demand elasticity, and a price-cost markup are sufficient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We find that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups. This suggests that marginal cost pass-through is incomplete, with estimates centered around 0.7. Our confidence intervals reject both zero pass-through and complete pass-through. We find heterogeneous incidence of changes in input prices across industries, with consumers bearing a smaller share of the burden than standards methods suggest.
Subjects: 
energy prices
incidence
environmental taxation
JEL: 
L11
H22
H23
Q40
Q54
Document Type: 
Working Paper

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