- 21â€ÂThe quality of infrastructure data are from Doing Business (2012) and the World Economic Forum’s Executive Opinion Surevy (Schwab, 2012) and measure â€Âbusiness executives percentation of their country’s port facilities†with scores ranging from 1 to 7.†Source: data.worldbank.org/topic/private-sector.
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- 26We cannot evaluate the impact of variation in markup adjustments as a result of variation in concentration and market power in the retail sector in our broad sample, because of a lack of data. OECD (Conway, 2005; Woelfl, 2009) reports indices of product market regulation in retail trade for up to 40 countries. We examined the impact of these indices on the long run food price pass through. We find, interestingly, that upper and lower price controls have a significant impact on the passthrough and display the correct sign: more price controls lead to a lower food price pass through. 27The additional results are in the web appendix. In the case of the NRA and TRI the African dummy becomes insignificant in the reduced sample without including the NRA and TRI themselves. So, the sample size drives the insignificance and not the inclusion of the market integration measures themselves.
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- 5A second, alternative explanation for the lower pass through in richer countries is that these countries tend to impose restrictions to shelter their agricultural producers from international competition (see for example Anderson et al. (2014) on price insulation in response to the food price rises of 2007-2008). However, controlling for different restrictive policy measures we find that GDP per capita is still a highly significant determinant of food price pass through.
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- 6See for further discussion Baltzer (2013). The role of margin services in exchange rate pass through is explored in Burstein et al. (2003) and Francois et al. (2013) without relating it to income per capita. Yang el al (2015) focus specifically on margin service costs and income levels in a computational (CGE) model based assessment of passthrough of food price shocks.
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- 7Passthrough was estimated as well at the aggregate level for more than 70 countries in IMF (2011), but these authors did not attempt to formally explain the variation in passthrough. Meyer and von Cramon (2004) and Vavra and Goodwin (2005) survey the earlier literature on food price pass through and Fackler and Goodwin (2001) go into the broader question of spatial price transmission. 8With nonhomothetic preferences we get identical results (see Appendix A), but the exposition with homothetic preferences is clearer. 9As discussed below, in our data local prices are measured in local currencies and international prices in dollars. Therefore we include the exchange rate E. 10Perfect market integration implies in our definition that there is a single market with a single price, thus guaranteeing equality of local and international prices. Hence our definition of market integration also requires the market to be spatially integrated without disparities across different locations.
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- Data are from the World Economic Forum’s Executive Opinion Survey, conducted for 30 years in collaboration with 150 partner institutes. The 2009 round included more than 13,000 respondents from 133 countries. Sampling follows a dual stratification based on company size and the sector of activity. Data are collected online or through in-person interviews. Responses are aggregated using sector-weighted S41 averaging. The data for the latest year are combined with the data for the previous year to create a two-year moving average. Respondents evaluated the efficiency of customs procedures in their country. The lowest score (1) rates the customs procedure as extremely inefficient, and the highest score (7) as extremely efficient.’ Clear exports Average time to clear exports through customs is the average number of days to clear direct exports through customs.
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- Notes 1According to the FAO, since 1961, earlier food price spikes occured in 1972-74, 1988, and 1995 (FAO 2009). Causes included a supply side mix of weather and export restrictions in certain key supplier markets. In3the more recent episodes, demand factors, including biofuel policy, have added to this mix. On the supply side, price volatility can discourage producers unable to hedge properly, and otherwise encourage a move to cash crops (FAO 2009). Of course, policies aimed at greater agricultural producvitiy, coupled with proper risk management mechanisms, may encourage greater domestic supply and home consumptiom. Though again, as shown by the recent episodes with biofuel demand, unintended demand management may direct domestic growth in production to non-food final demand channels.
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- We use GDP per capita in PPP terms. The three income groups are low (less than $770 per capita GDP at year 2000 prices) defined as group â€Âpoorâ€Â, lower and higher middle income ($770-$9300) defined as group â€Âmiddle†and high income defined as group â€Ârich†(more than $9300). On 31 countries we do not have income information, thus reducing the sample to 147. The countries with missing income data are: Anguilla, West Bank and Gaza, Guadeloupe, Macao, Isle of Man, French Polynesia, Cuba, Aruba, Bermuda, French Guiana, Netherlands Antilles, Niue, Saint Helena, Gibraltar, American Samoa, Cayman Islands, Guam, New Caledonia, Northern Mariana Islands, Andorra, Jersey, San Marino, Marshall Island, Puerto Rico, Cook Islands, Norfolk Island, Faeroe Islands, British Virgin Islands, Martinique, Greenland and R union.
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