Analyzing Food Price Trends in the Context of Engel?S Law and the Prebisch-Singer Hypothesis

37 Pages Posted: 20 Apr 2016

See all articles by John Baffes

John Baffes

World Bank

Xiaoli Etienne

West Virginia University - Division of Resource Management

Date Written: September 28, 2015

Abstract

Income growth in emerging economies has often been cited as a key driver of the past decade?s com-modity price boom?the longest and broadest boom since World War II. This paper shows that income has a negative and highly significant effect on real food commodity prices, a finding that is consistent with Engel?s Law and Kindleberger?s thesis, the predecessors of the Prebisch-Singer hypothe-sis. The paper also shows that, in the long run, income influences real food prices mainly through the manufacturing price channel (the deflator), hence weakening the view that income growth exerts strong upward pressure on food prices. Other (short-term) drivers of food prices include energy costs, inventories, and monetary conditions.

Keywords: Agricultural Economics, Trade and Agriculture, Agricultural Trade, Commodity Risk Management

Suggested Citation

Baffes, John and Etienne, Xiaoli, Analyzing Food Price Trends in the Context of Engel?S Law and the Prebisch-Singer Hypothesis (September 28, 2015). World Bank Policy Research Working Paper No. 7424. Available at SSRN: https://ssrn.com/abstract=2666809

John Baffes (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/jbaffes

Xiaoli Etienne

West Virginia University - Division of Resource Management ( email )

Morgantown, WV 26506
United States

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