Abstract
We study the relationship between global agricultural value chains (GAVCs) and food prices. Using longitudinal data on a sample of 138 countries for the period 2000 to 2015 and a Bartik shift-share instrumental-variable design, we study how participation in GAVCs at the country level relates to consumer food price levels and volatility. We find that participation in GAVCs is associated with a decrease in consumer food price levels and an increase in food price volatility, suggesting that participation in GAVCs involves a mean-variance trade-off. This trade-off is more pronounced among low-income countries, especially sub-Saharan African countries. We show that association between participation in GAVCs and food price volatility is likely due to a lack of diversification among suppliers, which can be expressed as an externality from the profit-maximization behavior of individual firms. Decomposing participation in GAVCs into upstream and downstream linkages, we find that food price volatility is associated more strongly with downstream participation than with upstream participation. We explore some policy options aimed at increasing the resilience of GAVCs.
Bernhard Dalheimer
Assistant Professor
Trade and Macro, Global Value Chains, Environmental Performance and Productivity, Statistical Programming