Taxes, Market Structure, and International Price Discrimination

Henderson, Richard C. | January 1, 1989

The Department of Commerce’s current cost-based calculation methods cannot measure tax pass-through. In one case, however, Commerce has employed a sophisticated econometric model of supply (cost) and demand elasticities to estimate tax pass-through. Because econometric models can do more than simply measure pass-through, the U.S. Government should adopt an econometric approach in all antidumping cases. Econometric models recognize the dependence of prices on market structure. These models thereby allow the U.S. Government to segregate pricing behavior consistent with different market structures from behavior that injures a balanced set of U.S. interests, which includes producers, consumers, and downstream industries.