What impact has food price inflation had on consumer welfare: a global analysis

Abstract

The impact of rising global food prices on consumer welfare is investigated. A quadratic AIDS model is estimated using data spanning countries at various levels of economic development. Statistical comparison suggests the QUAIDS model is preferred over the non-linear AIDS model. Estimated parameters are used to calibrate a QUAIDS indirect utility function and base utility for welfare analysis. Compensated variation associated with recently observed food price inflation for different foods in different income cohorts of countries is calculated. Per capita compensated variation increases with per capita expenditure. However, per capita compensated variation expressed as a percent of per capita expenditure falls as one moves from less developed to more developed countries. Aggregate compensating variation associated with annualized food price inflation between 2005 and 2008 is estimated at US$515 billion globallyConsumer/Household Economics,