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Why Is Food Cheaper in Rich (European) Countries?

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  • Leon Podkaminer

    () (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Relative to non-food items, food tends to be cheaper in rich, as compared with poor European countries. This tendency cannot be explained in terms of cost developments or foreign-trade considerations. A positive explanation proposed focuses on demand-income-supply interaction. An analysis of a cross-country price-augmented modification of Engel's Law, econometrically specified, indicates that the relative price of food is related positively to the supply of food items and negatively to that of non-food items. This finding is consistent with ¿agricultural price scissors' and also casts a different light on the nature of economic development and structural change.

Suggested Citation

  • Leon Podkaminer, 2005. "Why Is Food Cheaper in Rich (European) Countries?," wiiw Research Reports 322, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:rpaper:rr:322
    as

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    References listed on IDEAS

    as
    1. Clements, Kenneth W & Selvanathan, Saroja, 1994. "Understanding Consumption Patterns," Empirical Economics, Springer, vol. 19(1), pages 69-110.
    2. Leon Podkaminer, 2003. "Analytical notes on the Balassa-Samuelson effect," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 56(226), pages 207-221.
    3. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    4. Syrquin, Moshe, 1988. "Patterns of structural change," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 7, pages 203-273 Elsevier.
    5. Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
    6. Clements, Kenneth W & Selvanathan, Antony & Selvanathan, Saroja, 1996. "Applied Demand Analysis: A Survey," The Economic Record, The Economic Society of Australia, vol. 72(216), pages 63-81, March.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Vasily Astrov & Leon Podkaminer, 2017. "Energy Tariff Reform in Ukraine: Estimated Effects and Policy Options," wiiw Research Reports 416, The Vienna Institute for International Economic Studies, wiiw.
    2. Leon Podkaminer, 2013. "Persistent gaps between purchasing power parities and exchange rates under the law of one price: a puzzle (partly) explained?," Bank i Kredyt, Narodowy Bank Polski, vol. 44(4), pages 333-352.

    More about this item

    Keywords

    relative prices; structural change; cross-country demand functions; demand for food;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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