Complete Pass-Through in Levels*.
Empirical studies find that the pass-through of input cost changes to prices is incomplete: a 10% increase in costs causes downstream prices to rise less than 10%, even at long horizons. Using microdata from gas stations, food products, and manufacturing industries, I find that incomplete pass-throu...
| Publicado en: | Quarterly Journal of Economics Vol. 141; no. 2; pp. 1077 - 1136 |
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| Formato: | Artículo |
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Oxford University Press / USA
May2026
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| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=193095389&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 193095389 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00335533 QJE jtl: Quarterly Journal of Economics issn: 00335533 maglogo: N pubinfo: dt: May2026 vid: 141 iid: 2 pid: 622 pub: Oxford University Press / USA artinfo: ui: 193095389 10.1093/qje/qjag014 ppf: 1077 ppct: 59 formats: tig: atl: Complete Pass-Through in Levels*. aug: au: Sangani, Kunal affil: Northwestern University, United States su: Prices Price inflation Microeconomics Industrial costs Macroeconomic models Demand function sug: subj: Prices Price inflation Microeconomics Industrial costs Macroeconomic models Demand function ab: Empirical studies find that the pass-through of input cost changes to prices is incomplete: a 10% increase in costs causes downstream prices to rise less than 10%, even at long horizons. Using microdata from gas stations, food products, and manufacturing industries, I find that incomplete pass-through in percentages often disguises complete pass-through in levels : a $1/unit increase in input costs leads to $1/unit higher downstream prices. Pass-through appears incomplete in percentages due to a gap between prices and costs. Complete pass-through in levels contrasts with workhorse macroeconomic models that feature homothetic industry demand systems. I identify an alternative class of demand systems that yields pass-through in levels and highlight four implications. First, measuring pass-through in percentages can lead to spurious evidence of asymmetry and size dependence. Second, pass-through in levels leads to systematic fluctuations in relative price and markup dispersion that are not associated with changes in allocative efficiency. Third, pass-through in levels can explain dynamics of industry gross margins, operating profits, and entry in the data that are at odds with workhorse models. Finally, incorporating pass-through in levels into an input-output model of the U.S. economy better matches the volatility of consumer price inflation and the response of inflation to identified shocks. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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