This paper aims to determine whether the trade liberalization leads to lower equilibrium price in the domestic market, especially in the sectors that have more price-setting power. The main empirical finding is that trade liberalization has an effect on domestic price, which is a decrease in tariff leads to a fall in domestic price, ceteris paribus. And the more pricesetting power the sectors have, the stronger the impact. Empirical analyses are done using fixed effect 2SLS method. As a result, this suggests that one way to improve the welfare of consumers is that the policymaker can reduce the tariff in order to decrease the domestic prices.
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