Poverty and price transmission
Research output: Working paper › Research
A key parameter determining the welfare impact from a world market shock is the transmission elasticity which measures the average domestic response to an international price change. Many studies have estimated price transmission elasticities for a large number of countries but the variation in these estimates is so far largely unexplored. This paper proposes a model which explains a country's domestic price response to world market shocks in terms of its demand structure. The model delivers two testable predictions; price transmission is increasing in per capita food expenditure and in income inequality. The empirical analysis of price changes during the food crises confirms these predictions with a caveat. I find significant inverse U-shaped relationships between domestic food price growth in 2007-8 and 2010-11 and per capita food expenditure. Unequal countries also experienced higher price growth but the relationship is less significant. The finding that food prices in middle-income countries increased the most during the food crises is a cause for concern in light of the fact that the majority of the world's poor today live in middle-income countries.
Original language | English |
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Place of Publication | Frederiksberg |
Publisher | Department of Food and Resource Economics, University of Copenhagen |
Number of pages | 29 |
Publication status | Published - 2015 |
Series | IFRO Working Paper |
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Number | 2015/01 |
Links
- http://EconPapers.repec.org/RePEc:foi:wpaper:2015_01
Final published version
ID: 131367794