Derivation of Nutrient Prices from Household level Food Expenditure Data: Methodology and Applications

In cross-country/cross-region multilateral consumer price level comparisons, differences in the mix of food items consumed in individual countries pose a major problem. Comparison of the level of prices of food items in two countries will be difficult, if the sets of food items consumed in the two countries are very different. However, if the data on average level of intake of major nutrients and some measure of the corresponding nutrient prices is available, a comparison of the level of nutrient prices is possible. At the household level, given the prices of food items actually paid and the corresponding levels of actual intake of different nutrients (from the consumption of various food items), it is possible, in principle, to work out a set of shadow prices of individual nutrients. In this context, it may be mentioned that the shadow prices of nutrients thus derived, being based on households' actual consumption information, would be influenced by the prices of food items consumed, nominal income, household attributes and other preference factors characterizing the individual households. Given such sets of household level nutrient prices and corresponding nutrient intakes for individual countries, a set of multilateral nutrient price index numbers may be worked out and a cross-country comparison of the nutrient price level performed. In this paper a regression analysis-based procedure has been proposed for estimation of household-level unit values of carbohydrates, protein and fat, using a cross-sectional household level data set on food expenditure, total consumer expenditure, quantities of nutrients consumed and related variables. The proposed procedure has been applied to the Indian household level data for the year 1999-2000 using the 55th round Consumer Expenditure Survey of the National Sample Survey Organisation, Govt. of India and subsequently analysed separately for the rural and urban sector of some selected major Indian States.