%0 Report
        %A Farrokhi, Farid
%A Jinkins, David Carson
%A Xiang, Chong
        %T Gains from Trade and the Food Engel Curve
        %D 2022
        %8 2022 Oct
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 15674
        %U https://www.iza.org/publications/dp15674
        %X This paper examines the extent to which gains-from-trade predictions from commonly-used trade theories are consistent with observed household consumption decisions. Our approach is based on inference from household-level estimation of food Engel curves in the US and in a few other countries. For a given price index as the deflator of income, deviations from food Engel curves indicate how biased that price index is relative to the true household price index. We construct open-economy price indices based on trade theory and data, evaluate their biases according to our approach, and compare them with the bias of official CPI statistics. We find that theory-consistent open-economy price indices that account for industry-level heterogeneity and input-output linkages tend to eliminate a large fraction of the bias of CPI.
        %K Food Engel Curves
%K price indices
%K household-level consumption
%K gains from trade