Tariff pass-through in the middle products model

摘要

I use the middle products model of Sanyal and Jones to study the pass-through of a tariff on the price of non-traded final goods. I extend their analysis by comparing the short-run effect of the tariff, when all factors are immobile, with the effects when labor is mobile between all sectors. It is shown that the short-run pass-through may vary from zero to a magnified effect on the price of the final product, depending on the elasticities of substitution in consumption and production. The relative magnitude of these elasticities determines whether the pass-through with labor mobility is greater or less than the short-run pass-through.