Food Price Inflation and its Welfare Effects on Food-At-Home and Food-Away-From-Home Consumption

Food price inflation affects household welfare not only through higher prices, but also through the pathways by which price changes translate into real purchasing power losses across the household expenditure structure. Using quarterly Consumer Expenditure Survey data from 2004 to 2023, we estimate an EASI demand system and quantify the distributional welfare effects of food price inflation across fou income groups defined by Federal Poverty Line thresholds. Although aggregate welfare losses appear nearly uniform across income groups, this similarity conceals opposing distributional gradients within the food sector. FAH price increases impose regressive welfare losses, while FAFH price increases place larger relative burdens on higher income households. This regressive FAH burden intensified during the post 2020 inflation episode. The Slutsky decomposition shows that these opposing patterns operate through distinct mechanisms: FAH inflation is closely tied to income effect erosion that disproportionately reduces real purchasing power among lower income households, whereas cross income variation in FAFHprice responsiveness reflects structural differences in substitution capacity rather than purchasing power effects. These findings demonstrate that aggregate food welfare measures can obscure meaningful distributional inequality and point to a potential policy gap for households in the 130 to 185 percent FPLrange, whomayfacesubstantial food price burdens while receiving limited protection from existing food assistance programs.