Abstract

Asare Eric, Segarra Eduardo and Agyekum Michael

Food inflation has been shown to have an adverse impact on the welfare of households, especially netbuyers of food commodities in developing countries. This study investigates the effects of households’ socioeconomic and demographic characteristics on households’ welfare after food inflation. Welfare is the monetary compensation needed to restore a household to its pre-food inflation level of utility. A quadratic almost ideal demand system (QUAIDS) is estimated using five food groups; then the compensated price elasticities derived are used to compute the welfare values for each household. The study uses the Ethiopian household survey data collected jointly by International Maize and Wheat Improvement Center (CIMMYT), Mexico and Ethiopian Institute of Agricultural Research (EIAR) in 2009/2010. The study shows that low dependency ratio and increases in land holdings significantly improves households' welfare after food inflation.