Energy Cost Pass-Through in US Manufacturing: Estimates and Implications for Carbon Taxes
American Economic Journal: Applied Economics
vol. 12,
no. 2, April 2020
(pp. 303-42)
Abstract
We study how changes in energy input costs for US 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 that accounts for incomplete pass-through, imperfect competition, and substitution among 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.Citation
Ganapati, Sharat, Joseph S. Shapiro, and Reed Walker. 2020. "Energy Cost Pass-Through in US Manufacturing: Estimates and Implications for Carbon Taxes." American Economic Journal: Applied Economics, 12 (2): 303-42. DOI: 10.1257/app.20180474Additional Materials
JEL Classification
- H22 Taxation and Subsidies: Incidence
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L60 Industry Studies: Manufacturing: General
- Q48 Energy: Government Policy
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Q58 Environmental Economics: Government Policy
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