UNU-MERIT Working Papers Series

COVID-19 policy responses, mobility, and food prices: Evidence from local markets in 47 low to middle income countries

Stephan Dietrich, Valerio Giuffrida, Bruno Martorano & Georg Schmerzeck #2021-008

Governments around the world have taken drastic measures to contain the spread of the new Coronavirus. Policy responses to the pandemic could affect local food prices in sensitive ways. We hypothesize that mobility restrictions reduce trade, which increases food price dispersion and prices in regionally integrated markets, but not in segmented markets. We use WFP price data of 798 retail markets in 47 low to middle income countries to test if and how food prices were affected by the stringency of COVID- 19 measures. We assess market segmentation based on pre-COVID-19 price data and measure government responses using the Oxford Coronavirus Government Response Tracker. Our results show that more stringent policy responses increase food prices for integrated and less remote markets but not for segmented markets. The impact of the stringency of policy reposes on food prices is mediated by reductions in mobility and moderated by markets' pre-Corona dependency on trade.

Keywords: COVID-19, Prices, Food, Market Integration, Public Policy

JEL Classification: H12, D4, Q11, Q18, D04

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