The impact of climate on the law of one price: A test using North American food prices from the 1920s
Abstract
Using grocery price data for over 100 urban locations across the US and Canada from the 1920s, we show that deviations from the law of one price (LOP) were strongly related to climate differences. The effect of climate has a large impact on the elasticity of deviations from LOP with respect to distance, while having no impact on the border effect. We then test a counterfactual to show that the relationship between deviations from LOP and temperature does not hold when historical temperature data are replaced with contemporary. This is evidence that climate impacts production.
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Climate change could impact food prices by fluctuating demand and supply of affected crops, especially when climate becomes variable.
“Apart from directly affecting crop yields, climate change could also impact food prices by fluctuating the demand and supply of the affected crops, especially when the climate becomes variable (Bradbear and Friel 2013, Cater and Lew 2018, Mohamed et al 2024).”
From The impacts of climate change on violent conflict risk: a review of causal pathways (2024) · cites this paper as Cater and Lew 2018
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The impacts of climate change on violent conflict risk: a review of causal pathways
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- Authors
- Cater, B., & Lew, B.
- Affiliations
- Trent University (CA)
- Corresponding author
- Lew, Byron
- ORCID
- Lew, Byron
- Venue
- Canadian Journal of Economics/Revue canadienne d'économique
- Publisher
- Wiley
- Published
- 2018-10-08
- Volume
- 51
- Issue
- 4
- Pages
- 1191-1220
- ISSN
- 0008-4085 (ISSN-L)
- 1540-5982
- OpenAlex
- W2897610129
- Cited by
- 3
- References
- 51
- Citations by year
- 2025: 1 · 2024: 2
- FWCI
- 0.00
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Canadian Journal of Economics/Revue canadienne d économique (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economics of Agriculture and Food Markets
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Keywords
- law of one price, food prices, grocery prices, distance elasticity, border effects, counterfactual analysis, 1920s
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