Abstract

Bias in Reduced-Form Estimates of Pass-through

Alexander MacKay, Nathan H. Miller, Marc Remer, and Gloria Sheu, EAG 14-1, February 2014
PDF   Accessible Text

Abstract:
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.

Updated July 24, 2015

Was this page helpful?

Was this page helpful?
Yes No