Food Demand, Food Prices and Welfare Analysis utilizing EASI model

The impacts of rising food prices on poverty and welfare of Mexican households are examined by using a linearized version of the Exact Affine Stone Index (EASI) demand system. The distribution of monetary measures of welfare effects from food price changes is estimated as well as equivalence scales that allow inter-household comparison of welfare changes. After accounting for substitution effects, poverty related impacts were estimated. Findings indicate that the increase in prices of five food groups from 2006 to 2010 has led to an increment of 1.8 percentage points in the proportion of households with income below the food poverty line.