Decompose food price disparities in China: Evidence from wholesale markets

Abstract

This paper examines regional variations in food prices in China and the underlying factors contributing to these disparities. Leveraging administrative data from agricultural wholesale markets, we construct spatial price indices and reveal consistent monthly trends in disparities. Using our proposed decomposition method, we identify livestock products, particularly beef and pork, as the main components driving regional food price differences. We examine the role of local supply–demand factors in explaining spatial food price variations and find that local gasoline prices are a significant contributor to food price disparity. A one percent increase in local gasoline prices leads to a 0.6 percent rise in local food prices and exacerbates spatial food price disparities by 0.5–1.0 percent. These results highlight the importance of considering transportation costs and regional supply–demand dynamics in understanding food price variations across regions. Our findings have implications for policy aiming to address regional food price disparities and ensure food affordability.