Non-tariff barriers and consumer prices: evidence from Brexit
Bakker, J., Datta, N., Davies, R.
& De Lyon, J.
(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.
& De Lyon, J.
(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.
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.