Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 15-2022: Gains from Trade and the Food Engel Curve

Farid Farrokhi (), David Jinkins () and Chong Xiang ()
Additional contact information
Farid Farrokhi: Purdue University
David Jinkins: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Chong Xiang: Purdue University

Abstract: This paper examines the extent to which gains-from-trade predictions from commonly-used trade theories are consistent with observed household consumption decisions. Our approach is based on inference from household-level estimation of food Engel curves in the US and in a few other countries. For a given price index as the deflator of income, deviations from food Engel curves indicate how biased that price index is relative to the true household price index. We construct open-economy price indices based on trade theory and data, evaluate their biases according to our approach, and compare them with the bias of official CPI statistics. We find that theory-consistent open-economy price indices that account for industry-level heterogeneity and input-output linkages tend to eliminate a large fraction of the bias of CPI.

Keywords: Food Engel Curves; Price Indices; Household-level Consumption; Gains from Trade

JEL-codes: D12; E31; F14

Language: English

59 pages, October 29, 2022

Full text files

36928e2f-ccbe-45aa-b83e-deaccb7edd35 PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to CBS Library Research Registration Team ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:10:58.