20 November 2014
Asymmetric Pass-Through of Tariffs
An examination by Douglas A. Irwin of the landed and the duty-inclusive prices of raw sugar in New York City from 1890 to 1930 reveals a striking asymmetry: Tariff decreases were immediately passed through to consumers with no impact on import prices, while 60 percent of tariff increases were absorbed by foreign exporters in the form of reduced import prices. The apparent explanation: Imports collapse in response to increases, but do not surge after reductions.
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