Global agricultural value chains and food prices

Abstract We study the relationship between the extent of participation in global agricultural value chains (GAVCs) and food prices at the country level. Using longitudinal data on a sample of 138 countries for the period 2000–2015 and a shift‐share instrumental variable design, we study how the extent of a country's participation in GAVCs in a given year relates to food price levels and volatility in that same country and in the same year. We document a mean–variance trade‐off, finding that on average, participation in GAVCs is associated with a decrease in consumer food price levels but an increase in food price volatility. Looking at a country's upstream (i.e., closer to producers) or downstream (i.e., closer to consumers) positioning in GAVCs, we find that food price volatility is associated more strongly with downstream participation than with upstream participation.