Retailers and Consumers. The Pass-Through of Import Price Changes

Center for European Governance and Economic Development Research Discussion Paper Number 133

40 Pages Posted: 3 Jul 2012 Last revised: 21 Jun 2016

See all articles by Eike Berner

Eike Berner

Deutsche Bundesbank

Laura Birg

University of Goettingen (Göttingen)

Dominik Boddin

Deutsche Bundesbank - Deutsche Bundesbank Research Data and Service Centre

Multiple version iconThere are 2 versions of this paper

Date Written: June 20, 2016

Abstract

In this paper, we estimate pass-through rates of import price changes to retail prices across retailers and consumers for apparel purchases in Germany for the period of 2000 to 2007. We find that high-price retailers do not pass through changes in the import price. Pass-through rates for low-price retailers are 53% within 3 months. Consequently, pass-through rates for low-income households are 58%, significantly larger than those for high-income households. We then present one possible explanation for these observations in a theoretical model with endogenous vertical product differentiation due to bundling an ex-ante homogeneous import good with services. Following an import price change, retailers who sell a cheaper unbundled product change prices to a greater extent than retailers who sell a higher-priced bundle of product and service.

Keywords: Import prices, Pass-through, Retailers, Households

JEL Classification: D12, D31, F10

Suggested Citation

Berner, Eike and Birg, Laura and Boddin, Dominik, Retailers and Consumers. The Pass-Through of Import Price Changes (June 20, 2016). Center for European Governance and Economic Development Research Discussion Paper Number 133, Available at SSRN: https://ssrn.com/abstract=2024885 or http://dx.doi.org/10.2139/ssrn.2024885

Eike Berner (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

Laura Birg

University of Goettingen (Göttingen) ( email )

Platz der Goettinger Sieben 3
Goettingen, D-37073
Germany
+49 551 39 19686 (Phone)

Dominik Boddin

Deutsche Bundesbank - Deutsche Bundesbank Research Data and Service Centre ( email )

Wilhelm-Epstein-Straße 14
Frankfurt am Main, 60431
Germany

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