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Analyzing the impact of food price increases: assumptions about marketing margins can be crucial

Year of publication 2009

Author David Dawe and Irini Maltsoglou;Agriculture and Economic Development Analysis Division

Product type Document

Series title FAO Agricultural Economics Working Paper

Edition 1

Synopsis (short 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 explicit ly 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.

Language English

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