Recipient Organization
VIRGINIA POLYTECHNIC INSTITUTE
(N/A)
BLACKSBURG,VA 24061
Performing Department
(N/A)
Non Technical Summary
Two facts in the U.S. food system motivate this project. First, over the last 10 years the share of food expenditures spent on food-away-from-home (FAFH) has overtaken the share spent on food-at-home (FAH). Second, corresponding to this trend, the farmer's share of the FAFH food dollar has declined while the share of the FAH dollar has generally increased. These two facts lead to multiple questions regarding price and quantity relationships, market structures, and welfare distributions throughout the market channel that have not been explored or answered. Our project aims to understand the effects of the changing pattern of consumers' expenditure on food-at-home (FAH) to food-away-from-home (FAFH) on welfare distribution throughout the food supply chain, while recognizing that the effects will depend on the underlying market structure and consumer socioeconomic, demographic, and environmental factors. We formulate four interconnected objectives: estimation and decomposition of the food-farm marketing margin, estimation of consumer surplus through a demand system framework, a flexible theoretical model of market structure allowing for imperfect competition in the food supply chain, and welfare calculation for a range of alternative scenarios and policies. Consequently, the project will integrate four well-established research areas that have not been integrated before to understand important policy-relevant questions regarding price and quantity relationships, market structure, and welfare distribution throughout the market channel. To achieve our objectives, we will utilize public-use consumer expenditure survey microdata from the Bureau of Labor Statistics, NBER-CES Manufacturing Industry Database, and estimates from the literature. Our integrated framework will answer important policy and scenario questions related to socioeconomic and demographic profile of consumers, COVID-19, Ukraine war, etc. on welfare distribution throughout the food supply chain, while extending our knowledge on the four strands of literature and a unique way of integrating them.
Animal Health Component
40%
Research Effort Categories
Basic
60%
Applied
40%
Developmental
(N/A)
Goals / Objectives
Objective 1: Estimate and decompose the effect of FAH and FAFH prices on the food-farm marketing margin while considering the effects of changes in socioeconomic, demographic, and environmental factors, such as COVID-19.Objective 2: Estimate the change in consumer surplus for FAH and FAFH corresponding to the change in FAH and FAFH expenditures and how differences in socioeconomic, demographic, and environmental factors, such as COVID-19, affect the surplus measures.Objective 3: Develop an integrated theoretical model of market structure that allows for the interaction of market power and consumer demand factors by considering varying degrees of market power of the intermediary processing sector, for both upstream and downstream markets, that will have market differentiation as a function of socioeconomic, demographic, and environmental factors, such as the COVID-19.Objective 4: Calibrate and simulate the economic welfare changes for consumers, producers, and the intermediary processing sector as FAH and FAFH expenditures change as functions of socioeconomic, demographics and environmental factors, such as COVID-19, while also exploring the interacting effects of intermediary market power, both on the input- and output-side.
Project Methods
Efforts: The analysis will proceed according to the objectives. For objectives 1 and 2, we will assemble data from several sources: Consumer expenditure survey (CES) microdata from the Bureau of Labor Statistics (BLS), the NBER-CES Manufacturing Industry Database (NBER-CES 2022), and the Office of Productivity and Technology of BLS cost and productivity data, and price indices from BLS. For objective 1, we will develop a vector autoregressive time series system consisting of equations for the price of FAH, FAFH, Food and the Farm price. This will allow us to decompose the effects of changes in the FAFH and FAH prices on the farm price and margin and how the exogenous drivers have affected the FAFH, FAH, food, and farm prices differently. For objective 2, we will estimate the Lewbel and Pendakur (2009) Exact Affine Stone Index (EASI) demand system. The demand system will include FAH and FAFH as well as a broader set of goods (e.g. utilities, transportation, apparel) and allow the elasticity estimates to vary by other variables such as socioeconomics, demographics, and environmental factors. From this system we will calculate consumer surplus for FAH and FAFH and and how they may differ by socioeconomic, demographic, and environmental factors.For objectives 3 we will develop a theoretical model of the FAH and FAFH and the Farm sector that allows foar varying degrees of market power to interact with the demand system attributes of socioeconomic, demographic, and environmental factors.For objective 4 we will use the model developed in objective 3 to simulate various changes of sociodemographic, demographic, environemental as they interact with market power specifications to determine how welfare for consumers, producers, and intermediary processors change.Evaluation: For each objective we will have, and will be required, milestones on data collection and data analysis, and interpretation. The project is very sequential and thus will proceed sequentially, with accompanying stages needed to be completed before moving to the next objective.