Non-tariff barriers and consumer prices: evidence from Brexit

Bakker, Jan, Datta, Nikhil, Davies, Richard ORCID: 0009-0008-7027-8047 and De Lyon, Joshua (2022) Non-tariff barriers and consumer prices: evidence from Brexit. CEP Discussion Papers (1888). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

Non-Tariff Barriers (NTBs) are the main policy impediment to international trade, yet little is known about their pass-through to prices. This paper exploits the Brexit trade policy shock to quantify how NTBs affect consumer prices and welfare. The increase in NTBs raised prices by 6%, implying a pass-through of 50-80%. Based on a standard welfare framework, we show households lost £5.84bn, domestic producers gained £4.78bn, and £1.06bn was lost through deadweight loss. Due to differences in food expenditure shares, households in the lowest decile experience a 52% higher increase in the cost of living than households in the top decile.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2022 The Authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HB Economic Theory
JEL classification:	E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations F - International Economics > F1 - Trade > F15 - Economic Integration Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q11 - Aggregate Supply and Demand Analysis; Prices
Date Deposited:	27 Jan 2023 10:30
Last Modified:	11 Dec 2024 19:43
URI:	http://eprints.lse.ac.uk/id/eprint/118040

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