Bias in reduced-form estimates of pass-through

We show that, in general, consistent estimates of cost pass-through are not obtained from reduced-form regressions of price on cost. We derive a formal approximation for the bias that arises even under standard orthogonality conditions. We provide guidance on the conditions under which bias may frustrate inference.

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Year of publication:	2014
Authors:	MacKay, Alexander ; Miller, Nathan H. ; Remer, Marc ; Sheu, Gloria
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 123.2014, 2, p. 200-202
Publisher:	Elsevier
Subject:	Pass-through \| Reduced-form regression \| Bias

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Type of publication:	Article
Classification:	F14 - Country and Industry Studies of Trade ; F3 - International Finance ; F4 - Macroeconomic Aspects of International Trade and Finance ; L2 - Firm Objectives, Organization, and Behavior ; L3 - Nonprofit Organizations and Public Enterprise ; L4 - Antitrust Policy
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010906361