An estimation of tariff pass-through in Tunisia

An estimation of tariff pass-through in Tunisia

It is important to evaluate the net welfare effects of liberalisation policies in specific countries, yet a first step to accomplish this task is to analyse the extent to which changes in trade barriers are transmitted to changes in domestic prices. This paper evaluates the extent to which changes in tariffs and in international prices are transmitted into consumer prices in Tunisia over the period 2000 to 2008.

The paper illustrates that in Tunisia, the average MFN (most favoured nation) tariff for manufacturing products has been reduced from 19% in 2006 to 12% in 2013. Identically, the corresponding tariffs for agricultural goods were 54% and 19% respectively.

Consequently, for the purpose of the paper, a pass-through equation is estimated using sectoral panel data at the retail-product level and controlling for unobserved sectoral heterogeneity. As a result, the author finds that changes in tariffs are only partially transmitted to changes in retail prices, with an average pass-through of 7%.

The document indicates that this partial pass-through effect is lower in magnitude than the one found in other developing-country studies. However, the author finds that agricultural products seem to be driving the results; the tariff pass-through for agricultural products is around 8%, whereas for the manufacturing sector the pass-through coefficient is not statistically significant.

 

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