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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1556:
Imports, Pass-Through, and the Structure of Retail Markets

Horst Raff and Nicolas Schmitt

Abstract: We construct a model of trade with heterogeneous retailers to examine the effects of trade liberalization on retail market structure, imports and social welfare. We are especially interested in studying the degree of pass-through of import into retail prices and the effects of retail market regulation. The paper shows that the degree of pass-through may be large when market structure effects are taken into account, and that restrictions on retailing may have significant effects on imports and the degree of pass-through. The paper helps explain the apparent discrepancy between the low observed degree of pass-through and the large benefit that consumers seem to derive from trade liberalization

Keywords: international trade, retailing, pass-through, firmheterogeneity; (follow links to similar papers)

JEL-Codes: F12,; L11; (follow links to similar papers)

35 pages, September 2009

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