Urban Wage Behaviour and Food Price Inflation in Ethiopia

Fantu Bachewe and Derek Headey

Journal of Development Studies, 2017, vol. 53, issue 8, 1207-1222

Abstract: Theoretically, increases in food prices could benefit the poor by increasing the demand for unskilled labour, and hence their wages. This paper tests this hypothesis in urban Ethiopia. We exploit a unique panel of monthly price and wage data from 111 urban markets to first construct welfare-relevant measures of real wages, before employing various panel estimators to formally test wage-food price integration. We find moderate rates of long-run adjustment to increases in food prices, but that adjustment is very slow. This implies highly adverse short-run welfare impacts of higher food prices on the urban poor.

Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/00220388.2016.1219343

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