Accurately Estimating Poverty Effects of Food Price Escalation: A Mexican Case Study

With the continued instability in consumer food prices, questions abound regarding how food price shocks affect poverty in the developing world. Following up on Wood et al. (2012), this research uses repeated cross sectional Government of Mexico household surveys to test the longer term effects of food price shocks on household poverty status. Summary statistics for biennial surveys conducted in 2008 and 2010 provide an initial understanding of how households react to food price spikes. After calculating food demand systems for these years, we compare the importance of accounting for second order welfare effects during time of high and low food price increases. Assessing the accuracy of different measurement options will allow researchers to know which technique to use when assess the effect of future food price changes.