Pass-Through, Food Prices and Food Security

This paper studies the impact of world food price movements on final consumption prices across countries with different levels of income. Using FAO world food price index data and ILO local consumer price index data we estimate the rate of pass through of world food prices onto final consumption prices. We find that the rate of pass through from world food prices to final consumption prices is about 30% in low and middle income countries and about 12% in high income countries. A larger rate of pass through in low income countries reflects a larger share of primary food in processed food and a smaller role for services margins. Indeed, the estimated rates of pass through are close to primary food shares in total food consumption in the different groups of countries from the national accounts in the GTAP database.