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Poverty and Price Transmission

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  • Elleby, Christian

Abstract

This paper analyzes the relationship between international and domestic food prices in a stylized economic model. The model is based on the empirically sound principle of quality substitution and a dichotomy between traded and domestic goods. Households are equipped with preferences which make them substitute towards the traded variety as their income rise. Price transmission therefore increases with per capita income but also with income inequality. Model predictions are tested on aggregate food price data covering the 2007-8 and 2010-11 periods. Estimated effects are qualitatively in line with the model's predictions as well as being statistically and economically significant.

Suggested Citation

  • Elleby, Christian, 2014. "Poverty and Price Transmission," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182722, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae14:182722
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    Keywords

    Demand and Price Analysis; Food Security and Poverty;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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