Supply Chain Disruptions, Pass-Through, and Firm Heterogeneity

Abstract:

We study the firm-level pass-through of the supply chain shocks to consumer prices and the role of market structure using the model and a newly constructed dataset that integrates high-frequency, firm- and product-level data from U.S. imports and consumer panel. We leverage unique Bill of Lading data, which provides transaction-level details about trade relationships, and consumer panel data from Numerator, which offers product-level price and sales information. Using the shift-share IV strategy, we find a sizable pass-through elasticity of delivery delays to consumer prices, especially if delays in import schedules are more protracted. Not all firms pass through shocks to prices the same way. Larger firms and those with higher market shares in their respective product categories show larger pass-through elasticities. To study the importance of supply chain shocks, firm pass-through, and the role of market structure in the recent pandemic episode, we develop a model where supply chain managers choose and manage supply chains, face competition, finite production capacity, and stochastic delivery delays along the supply chain.