International Income and Price Elasticity Estimates: An Update

Price and income elasticities are key to understanding how changes in prices and income affect food demand. The U.S. Department of Agriculture’s International Food Security Assessment and Baseline models rely on price and income elasticity estimates from previous studies (Seale et al., 2003; Muhammad et al., 2011). This study derives new elasticities using an Almost Ideal Demand System (AIDS) approach and relies on data from the 2017 International Comparison Program (ICP) of the World Bank. The ICP data, covering 176 economies, are categorized by geographic regions and income groups. Results indicate that consumers in low-income economies allocate a higher proportion of their income to necessities like food, while those in high-income economies spend more on luxury goods. Marginal shares demonstrate changes in food spending distribution across subcategories based on income levels. The study also identifies the price elasticity of various food items, distinguishing between relatively price inelastic (e.g., “bread and cereals,” “oils and fats,” “fruit,” “vegetables,” and “sugar, jam, honey, chocolate, and confectionery”) and price elastic (e.g., “meat,” “fish and seafood,” and “nonalcoholic beverages”) subcategories.