Import Tariff Pass-Through Effect and the Spatial Distribution of Domestic Consumer Goods Prices: Zimbabwe (2009 to 2019)

ABSTRACT

The study of import tariffs pass-through has been observed to be crucial for policymaking. The extant literature on import tariff pass-through effects has ignored the possibility of spatial dependence between domestic goods prices. This study proposes an extension of the traditional empirical model by controlling for the domestic spatial dependence of prices at the district level. The estimates rely on a district-level panel dataset of consumer goods for Zimbabwe. The spatial econometrics models used show positive spatial dependence of domestic goods prices. When compared to our modified model, the traditional import tariffs pass-through model was found to highly overestimate the import tariff pass-through effect.

KEYWORDS:

• Import tariffs
• pass-through
• regions/districts
• spatial dependence
• spatial econometrics
• trade policy

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/08853908.2023.2289427

Notes

¹ The ITPTE ranges from an incomplete to a complete pass-through effect. An incomplete import tariff pass-through effect means that a change in import tariffs will result in a small effect on domestic goods prices.

² This is where a regression model leaves out relevant variables. Therefore, the model will attribute the effect of the missing variables to the estimates of the included variables, which compromises the precision of the latter estimates.

³ A spatial weight matrix is a quantification of the spatial relationships that exist among regions. It covers the distance from one region to another, specifying that regions which are closer together are more related compared to regions which are not so close together.

⁴ Sourced from https://www.diva-gis.org/datadown.

⁵ Sourced from https://www.diva-gis.org/datadown.

⁶ The matrix acknowledges that each district has an intrinsic degree of uniqueness due to its situation relative to the rest of the district spatial system.

Additional information

Funding

The work was supported by the University of Johannesburg [cdn004556].