FOOD AND AGRICULTURAL PRICES ACROSS COUNTRIES AND THE LAW OF ONE PRICE

Ken W. Clements, Jiawei Si and Long Vo
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Ken W. Clements: Business School, The University of Western Australia, https://www.web.uwa.edu.au/person/kenw..clements

No 17-04, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: This paper investigates several basic characteristics of food and agricultural prices across commodities, countries and time. The first part of the paper uses consumer prices across commodities and countries from the International Comparisons Program and finds that food has a distinct tendency to be cheaper in rich countries as compared to poor ones. This possibly reflects the productivity bias effect of Balassa and Samuelson, or Engel’s law. Food prices are also less dispersed in rich countries. Cross-country and cross-commodity tests reject the law of one price (LOP) more often than not with, as might be expected with consumer prices. In the second part of the paper, data on agricultural producer prices from the Food and Agriculture Organisation are used to test if deviations from the LOP are stationary, using a panel approach. As about three-quarters of the 100+ products obey the law, there seems to be some support for the LOP in this context.

Pages: 62
Date: 2017
New Economics Papers: this item is included in nep-agr and nep-opm
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