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Urban Wage Behaviour and Food Price Inflation in Ethiopia

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  • Fantu Bachewe
  • Derek Headey

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.

Suggested Citation

  • Fantu Bachewe & Derek Headey, 2017. "Urban Wage Behaviour and Food Price Inflation in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 53(8), pages 1207-1222, August.
    • Handle: RePEc:taf:jdevst:v:53:y:2017:i:8:p:1207-1222
    DOI: 10.1080/00220388.2016.1219343
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    Cited by:

    1. Xiaoshi Zhou & Wanglin Ma & Gucheng Li, 2018. "Draft Animals, Farm Machines and Sustainable Agricultural Production: Insight from China," Sustainability, MDPI, vol. 10(9), pages 1-16, August.
    2. Alan Gelb & Vijaya Ramachandran & Christian J. Meyer & Divyanshi Wadhwa & Kyle Navis, 2020. "Can Sub-Saharan Africa Be a Manufacturing Destination? Labor Costs, Price Levels, and the Role of Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 20(2), pages 335-357, June.
    3. World Bank, 2020. "Ethiopia Poverty Assessment," World Bank Publications - Reports 33544, The World Bank Group.
    4. Headey, Derek & Bachewe, Fantu & Marshall, Quinn & Raghunathan, Kalyani & Mahrt, Kristi, 2024. "Food prices and the wages of the poor: A cost-effective addition to high-frequency food security monitoring," Food Policy, Elsevier, vol. 125(C).

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