Working Paper: NBER ID: w22281
Authors: Sharat Ganapati; Joseph S. Shapiro; Reed Walker
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.
Keywords: Energy Costs; Carbon Taxes; Manufacturing; Welfare Incidence
JEL Codes: H22; H23; Q40; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Energy price changes (Q41) | Marginal costs (D40) |
| Marginal costs (D40) | Unit output prices (P22) |
| Unit output prices (P22) | Consumer welfare (D69) |
| Unit output prices (P22) | Producer welfare (J54) |
| Energy price changes (Q41) | Consumer welfare (D69) |
| Energy price changes (Q41) | Producer welfare (J54) |
| Passthrough rate (H22) | Consumer welfare (D69) |
| Passthrough rate (H22) | Producer welfare (J54) |