TY  - RPRT
        AU  - Farrokhi, Farid
AU  - Jinkins, David Carson
AU  - Xiang, Chong
        TI  - Gains from Trade and the Food Engel Curve
        PY  - 2022/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 15674
        UR  - https://www.iza.org/publications/dp15674
        AB  - 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.
        KW  - Food Engel Curves
KW  - price indices
KW  - household-level consumption
KW  - gains from trade
        ER  -