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An Empirical Analysis of the Welfare Consequences of Rising Food Prices in Urban China: The Easi Approach

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  • Vardges Hovhannisyan
  • Aleksan Shanoyan

Abstract

The recent rise in food prices in China triggered by global commodity price spikes led to growing welfare concerns among economists and policymakers. While evidence suggests the Chinese government was successful in preventing major upswings in food prices, the true impact on consumer welfare remains unknown. This study examines consumer welfare consequences of food price increases in China based on the Fixed‐Effects Exact Affine Stone Index (FE‐EASI) demand model that accounts for unobserved consumer and provincial heterogeneity estimated on nationally representative provincial‐level panel data. The effects of actual price changes as well as two policy initiatives are evaluated. The major findings indicate that urban wages outpaced food prices, and consumer welfare loss has been moderate as a fraction of food expenditures. The results of policy analysis indicate that government subsidies overcompensated the negative effects of price increases for the relatively less affluent households.

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  • Vardges Hovhannisyan & Aleksan Shanoyan, 2020. "An Empirical Analysis of the Welfare Consequences of Rising Food Prices in Urban China: The Easi Approach," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(4), pages 796-814, December.
    • Handle: RePEc:wly:apecpp:v:42:y:2020:i:4:p:796-814
    DOI: 10.1093/aepp/ppz003
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    3. Wenshou Yan & Yan Cai & Faqin Lin & Dessie Tarko Ambaw, 2021. "The Impacts of Trade Restrictions on World Agricultural Price Volatility during the COVID‐19 Pandemic," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(6), pages 139-158, November.

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