Energy Prices, Pass-Through, and Incidence in U.S. Manufacturing*
January 2016
Working Paper Number:
CES-16-27
Abstract
This paper studies how increases in energy input costs for production are split between consumers and producers via changes in product prices (i.e., pass-through). We show that in markets characterized by imperfect competition, marginal cost pass-through, a demand elasticity, and a price-cost markup are suffcient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We and that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups. This suggests that marginal cost pass-through is incomplete, with estimates centered around 0.7. Our confidence intervals reject both zero pass-through and complete pass-through. We and heterogeneous incidence of changes in input prices across industries, with consumers bearing a smaller share of the burden than standards methods suggest.
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demand,
market,
economist,
econometric,
cost,
commodity,
price,
monopolistic,
expenditure,
regulation,
pricing,
consumption,
econometrician,
emission,
energy prices,
consumer,
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utility,
electricity prices
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Manufacturing Energy Consumption Survey,
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