Working Paper: NBER ID: w20635
Authors: Douglas A. Irwin
Abstract: Direct empirical evidence on whether domestic consumers or foreign exporters bear the burden of a country's import duties is scarce. This paper examines the incidence of U.S. sugar duties using a unique set of high-frequency (weekly, and sometimes daily) data on the landed and the duty-inclusive price of raw sugar in New York City from 1890 to 1930, a time when the United States consumed more than 20 percent of world sugar production and was therefore plausibly a "large" country. The results reveal a striking asymmetry: a tariff reduction is immediately passed through to consumer prices with no impact on the import price, whereas about 40 percent of a tariff increase is passed through to consumer prices and 60 percent borne by foreign exporters. The apparent explanation for the asymmetric response is the asymmetric response of demand: imports collapse upon a tariff increase, but do not surge after a tariff reduction.
Keywords: tariff incidence; sugar duties; U.S. trade policy
JEL Codes: F13; F14; N11; N12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction in tariffs (F13) | Domestic consumer prices (D19) |
| Increase in tariffs (F69) | Domestic prices (P22) |
| Increase in tariffs (F69) | Foreign exporters (F10) |
| Reduction in tariffs (F13) | Import prices (P22) |
| Increase in tariffs (F69) | Collapse in imports (F10) |