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The High Cost of Eating: Agricultural Protection and International Differences in Consumer Food Prices

  • Robert E. Lipsey
  • Birgitta Swedenborg

Prices of food vary greatly among the developed countries, and some countries' food prices have been consistently far above the OECD average. The main explanation for persistently high food price levels is the extent of protection of agricultural products at the farm level, partly explainable by the desire to retain agriculture in the face of poor growing conditions. A second important influence for some countries is a high level of VAT on food. A third is deviations of aggregate country price levels from the levels that would be predicted from their per capita incomes, presumably because of omitted characteristics of the countries' economies, such as, possibly, inefficient or monopolistic service sectors. In addition, there are occasional episodes of high price levels due to temporary factors affecting exchange rates. The issues raised by these large food price differences are relevant to understanding real income differences among countries. They are also relevant to the current round of GATT negotiations, in which agricultural protection is a frequent stumbling block, and to the European Community's hopes of increasing competitive pressures through the creation of a freer internal market.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4555.

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Date of creation: Dec 1993
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Publication status: published as Review of Income and Wealth, series 42, no. 2, pp. 181-194, June 1996.
Handle: RePEc:nbr:nberwo:4555
Note: ITI
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  1. Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
  2. Irving B. Kravis & Robert E. Lipsey, 1990. "The International Comparison Program: Current Status and Problems," NBER Working Papers 3304, National Bureau of Economic Research, Inc.
  3. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
  4. Irving B. Kravis & Robert E. Lipsey, 1986. "The Assessment of National Price Levels," NBER Working Papers 1912, National Bureau of Economic Research, Inc.
  5. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-86, June.
  6. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 81(1), pages 325-34, March.
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