What impact has food price inflation had on consumer welfare: a global analysis

The impact of rising global food prices on consumer welfare is investigated. A quadratic AIDS model is estimated using data spanningcountries at various levels of economic development. Statistical comparison suggests the QUAIDS model is preferred over the non-linear AIDSmodel. Estimated parameters are used to calibrate a QUAIDS indirect utility function and base utility for welfare analysis. Compensated variation associated with recently observed food price inflation for differentfoods in different income cohorts of countries is calculated. Per capitacompensated variation increases with per capita expenditure. However,per capita compensated variation expressed as a percent of per capitaexpenditure falls as one moves from less developed to more developedcountries. Aggregate compensating variation associated with annualizedfood price inflation between 2005 and 2008 is estimated at US$515 billionglobally