Energy Cost Pass-Through in U.S. Manufacturing: Estimates and Implications for Carbon Taxes

65 Pages Posted: 24 May 2016

See all articles by Sharat Ganapati

Sharat Ganapati

Yale University

Joseph S. Shapiro

University of California, Berkeley; National Bureau of Economic Research (NBER)

Reed Walker

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Date Written: May 2016

Abstract

We study how changes in energy input costs for U.S. manufacturers affect the relative welfare of manufacturing producers and consumers (i.e., incidence). We also develop a methodology to estimate the incidence of input taxes which accounts for incomplete pass-through, imperfect competition, and substitution amongst inputs. For the several industries we study, 70 percent of energy price-driven changes in input costs get passed through to consumers in the short- to medium-run. The share of the welfare cost that consumers bear is 25-75 percent smaller (and the share producers bear is larger) than models featuring complete pass-through and perfect competition would suggest.

Suggested Citation

Ganapati, Sharat and Shapiro, Joseph S. and Walker, Reed, Energy Cost Pass-Through in U.S. Manufacturing: Estimates and Implications for Carbon Taxes (May 2016). NBER Working Paper No. w22281, Available at SSRN: https://ssrn.com/abstract=2783195

Sharat Ganapati (Contact Author)

Yale University ( email )

New Haven, CT 06520
United States

Joseph S. Shapiro

University of California, Berkeley ( email )

HOME PAGE: http://joseph-s-shapiro.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Reed Walker

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building
Berkeley, CA 94720
United States

HOME PAGE: http://faculty.haas.berkeley.edu/rwalker/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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