Local Food Prices and International Price Transmission

83 Pages Posted: 20 Mar 2017

See all articles by Eddy Bekkers

Eddy Bekkers

World Trade Organization (WTO)

Martina Brockmeier

University of Hohenheim

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Fan Yang

University of Hohenheim

Date Written: March 2017

Abstract

World food prices spiked in the periods 2007-2008 and 2010-2011. The impact of these spikes in world food prices on local food prices and thus on local consumers is determined by the food price pass through. Pass through is defined as the extent to which changes in world food prices lead to changes in local food prices. We examine the determinants of variation in food price pass through from global to local consumer prices in a global sample of 147 countries, using FAO data on world food prices and ILO data on food prices for consumers. While market integration matters, our study finds that income per capita is the dominant factor explaining cross-country variation in pass through of food prices. We estimate an elasticity of about -0.3 of pass through with respect to income per capita. This means far greater price transmission of food price shocks at the commodity level to final consumers in low income countries than in high income countries. The implication is that future swings in world food prices will in particular jeopardise food security in poor countries. Trade policy measures of market integration also affect the pass through significantly, whereas infrastructure and geography measures play no significant role.

Keywords: Food Price Pass Through, Local Food Prices, Primary Food Shares

JEL Classification: Q02, Q11, Q17, Q18

Suggested Citation

Bekkers, Eddy and Brockmeier, Martina and Francois, Joseph F and Yang, Fan, Local Food Prices and International Price Transmission (March 2017). CEPR Discussion Paper No. DP11912. Available at SSRN: https://ssrn.com/abstract=2937762

Eddy Bekkers (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva 21, CH-1211
Switzerland

Martina Brockmeier

University of Hohenheim ( email )

International Agricultural Trade and Food Security
490B
Stuttgart, 70599
Germany

Joseph F Francois

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

Fan Yang

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

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