TY - JOUR

T1 - Food price transmission and economic development

AU - Elleby, Christian

AU - Jensen, Frank

PY - 2019

Y1 - 2019

N2 - In this paper we challenge the conventional wisdom that the world’s poorest countries are also the most vulnerable to spikes in international food prices. We derive an inverted U-shaped relationship between food price transmission and the development level of a country from a theoretical model. This prediction is subsequently tested in two sets of regressions where economic development is approximated by per capita income and where we control for a number of other potential determinants of food price transmission. The first set of regressions is based on estimated transmission elasticities and the second on actual domestic food price changes during spikes in international food prices. In both sets of regressions we find strong evidence of the existence of an inverted U-shaped relation between food price transmission and income. Thus, food prices in middle income (rather than in low income) countries respond the strongest to changes in international food prices, implying that the poor in these countries are the most exposed to spikes in food prices. We also show that the factors explaining the variation in the estimated transmission elasticities can explain the variation in domestic food price changes during spikes in international food prices equally well.

AB - In this paper we challenge the conventional wisdom that the world’s poorest countries are also the most vulnerable to spikes in international food prices. We derive an inverted U-shaped relationship between food price transmission and the development level of a country from a theoretical model. This prediction is subsequently tested in two sets of regressions where economic development is approximated by per capita income and where we control for a number of other potential determinants of food price transmission. The first set of regressions is based on estimated transmission elasticities and the second on actual domestic food price changes during spikes in international food prices. In both sets of regressions we find strong evidence of the existence of an inverted U-shaped relation between food price transmission and income. Thus, food prices in middle income (rather than in low income) countries respond the strongest to changes in international food prices, implying that the poor in these countries are the most exposed to spikes in food prices. We also show that the factors explaining the variation in the estimated transmission elasticities can explain the variation in domestic food price changes during spikes in international food prices equally well.

U2 - 10.1080/00220388.2018.1520216

DO - 10.1080/00220388.2018.1520216

M3 - Journal article

AN - SCOPUS:85053559782

VL - 55

SP - 1708

EP - 1725

JO - Journal of Development Studies

JF - Journal of Development Studies

SN - 0022-0388

IS - 8

ER -