Does the Urban Population Pay More for Food? Implications in Terms of Poverty

• Published in: Applied spatial analysis and policy Vol. 12; no. 3; pp. 547 - 566
• Main Authors: Navamuel, Elena Lasarte, Morollón, Fernando Rubiera, Vázquez, Esteban Fernandez
• Format: Journal Article
• Language: English
• Published: Dordrecht Springer Netherlands 15.09.2019; Springer Nature B.V
• Subjects: Cities; Competition; Cost of living; Costs; Developed countries; Developing countries; Economic models; Food; Food consumption; Food production; Food products; Households; Human Geography; Land; Landscape/Regional and Urban Planning; LDCs; Poverty; Price indexes; Prices; Quality of life; Regional/Spatial Science; Social Sciences; Urban areas; Urban population; Urban populations; Spain; Q11; Poverty; D12; Almost ideal demand systems (AIDS); Q18 and R22; City size; Urban economics and Spain; Food products costs
• ISSN: 1874-463X; 1874-4621
• DOI: 10.1007/s12061-018-9254-x

The relation between urban agglomeration and final food consumer prices is controversial. Pressure over the land in large cities results in higher prices in general and for feeding products in particular. On the other hand, large cities provide greater competition among firm, which might drop prices down. Previous literature studying this issue was mainly focused on developing countries, finding empirical evidence of higher food costs in large urban concentrations. Such evidence is missing, however, for developed countries. In this paper, we are interested in measuring the differences in the cost of food products among several city sizes for the case of Spain. A comparison that applies a standard price index would not be appropriate because it would ignore consumer substitution capacity. To make a proper comparison, a “true” food products costs index should be obtained. We have estimated a demand system for food products consumed by Spanish households to measure their costs in cities of different sizes across Spain and over the recent period 2008–2015. The data come from the Spanish Household Budget Survey (HBS). We found that the cost of attaining a given level of utility in food consumption is greater in the largest cities. Additionally, as an example of the political implications of this analysis, we analyze the effect over the quality of life by adjusting the poverty lines with our index and observe that the poverty rates of the largest urban areas in a developed country, such as Spain, might be substantially underestimated if differences in cost of living are not taken into account.