Jacob Short

Using Canadian firm-level market shares and an oligopolistic model, the paper shows that a 25% counter-tariff on U.S. imports raises Canada's aggregate price index by 0.66%, far below direct cost pass-through predictions due to consumer substitution and markup adjustments.

We develop a framework to quantify how tariff changes on imported goods affect sectoral and aggregate consumption prices through direct and production-network channels. Using Canada's input-output matrix and administrative firm-good import data for the universe of Canadian firms, we estimate price elasticities for tariffs on U.S.-imported goods.

We measure the contribution to inflation from the growth in markups of Canadian firms. The dynamics of inflation and markups suggest that changes in markups could account for less than one-tenth of inflation in 2021. Further, they suggest that peak inflation was driven primarily by changes in the costs of firms.

Declining labour market dynamism of workers results in an increasing wedge between their earnings and their marginal product as they age. This wedge and the demographic shift in the earnings shares of older workers can account for 59% of the decline in labor’s share of earnings in the United States.

We estimate an aggregate elasticity of substitution between capital and labor near or below one, which implies that capital deepening cannot explain the global decline in labor's share. Our methodology derives from transition paths in the neo-classical growth model.