Empirical studies of commodity cost pass-through typically find that pass-through is incomplete: even at long horizons, a 10% increase in costs causes retail prices to rise less than 10%. Using microdata from gasoline and food products, Incomplete pass-through in percentages often disguises complete pass-through in levels: a $1/unit increase in commodity costs leads to $1/unit higher retail prices. Pass-through appears incomplete in percentages due to an additive margin between marginal costs and prices. An implication of complete pass-through in levels is that rising commodity costs lead to higher inflation rates for low-margin products in a category, though absolute price changes are similar across products. This generates cyclical inflation inequality. I find that food-at-home inflation for the lowest income quintile is 10% more sensitive to upstream commodity costs. From 2020–2023, unequal commodity cost pass-through is responsible for two-thirds of the gap in food-at-home inflation rates experienced by low- and high-income households.
- Date Posted:
- December 6, 2023
With the latest PISA results, America has proven once again that it has one of the smartest populations and, perhaps, the best education systems. American Asians and Whites topped the charts; American Hispanics beat all other Hispanics; American Blacks did well. Some people think the most important scale is mathematics, while others think it's reading, and a select few think it's science. They all indicate g, so there's no a priori rationale for favoring any particular scale. Regardless, look at how America did in mathematics! America's reading performance is perhaps its most laudable this year. American Asians came in first in this test, and American Whites came in third.