TARIFF RATE PASS-THROUGH: BUYER POWER AND PRODUCT DIFFERENTIATION EFFECTS | Journal of Economics an

The economic actor who pays the tax is not always the same as the economic actor who bears the tax burden, according to economic theory. Tariffs, like any other tax, raise domestic prices. The question is whether tariffs are fully passed on to local pricing or if foreign producers would shoulder some of the burden. This study examines how tariff rate pass-throughs change with product differentiation and buyer market concentration to offer insight on this topic. The study looks at a few industrial industries from 1996 to 2015, while tariff rates were falling. In increasingly varied domestic product marketplaces, tariffs only partially filter through to import pricing. Tariffs also fail to flow through in highly populated areas.

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