Analyzing the Impact of Food Price Increases: Assumptions about Marketing Margins can be Crucial

David Dawe and Irini Maltsoglou
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David Dawe: Agricultural and Development Economics Division, Food and Agriculture Organization
Irini Maltsoglou: Environment, Climate Change and Bioenergy Division Food and Agriculture Organization Italy

No 09-02, Working Papers from Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA)

Abstract: This paper shows the importance of explicitly considering marketing margins in analyses of the impact of price changes on the welfare of different segments of the population. Failure to acknowledge the implicit marketing assumptions embedded in an analysis that assumes equal percentage changes for both farm and consumer prices leads to a bias towards finding negative impacts of higher food prices. In addition, the bias is not necessarily uniform across income quintiles; thus, failure to explicitly consider marketing margins could lead one to conclude that the poor are hurt relatively more than the rich by a price increase when in fact the opposite is true, or vice-versa. We provide rules of thumb and simple techniques that may help to ascertain, in many circumstances, the percentage change in consumer prices that is appropriate for a given percentage change in farm prices.

Keywords: Food prices; food policy; poverty; household surveys; marketing margins; distributional impact. (search for similar items in EconPapers)
JEL-codes: Q12 Q13 Q17 Q18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-mkt
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:fao:wpaper:0902

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