Applied Spatial Analysis and Policy

, Volume 12, Issue 3, pp 547–566 | Cite as

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

  • Elena Lasarte Navamuel
  • Fernando Rubiera MorollónEmail author
  • Esteban Fernandez Vázquez


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.


City size Food products costs Almost ideal demand systems (AIDS) Poverty Urban economics and Spain 

JEL Classification

D12 Q11 Q18 and R22 


Compliance with Ethical Standards

Informed Consent

Informed consent was obtained from all individual participants included in the study.


  1. Alonso, W. & Fajans, M. (1970). Cost of living by urban size. Working Paper N. 128. Department of City and Regional Planning. University of California, Berkeley. Google Scholar
  2. Antelo, M., Magdalena, P., & Reboredo, J. C. (2017). Economic crisis and unemployment effect on household food expenditure: the case of Spain. Food Policy, 69, 11–24.CrossRefGoogle Scholar
  3. Asra, A. (1999). Urban-rural differences in cost of living and their impact on poverty measures. Bulletin of Indonesian Economic Studies, 35(3), 51–69.CrossRefGoogle Scholar
  4. Atuesta, L., & Paredes, D. (2012). A spatial cost of living for Colombia using a microeconomic approach and cesored data. Applied Economics Letters, 19(18), 1799–1805.CrossRefGoogle Scholar
  5. Ayala, L., Jurado, A., & Pérez-Mayo, J. (2015). Drawing the poverty line: do regional thresholds and prices make a difference? Applied Economic Perspectives and Policy, 36(4), 309–332.Google Scholar
  6. Cavailhès, J., Gaigne, C., & Thisse, J.-F. (2004). Trade cost versus urban cost. CERP Disscussion Papers, 4400.Google Scholar
  7. Cebula, R., & Todd, S. (2004). An empirical note on determinants of geographic living - cost differentials for counties in the State of Florida, 2003. The Review of Regional Studies, 34(1), 112–119.Google Scholar
  8. Chen, S., & Ravallion, M. (2010). The developing world is poorer than we thought, but no less successful in fight against poverty. Quarterly Journal of Economics, 125(4), 1577–1625.CrossRefGoogle Scholar
  9. Combes, P., & Gobillon, L. (2015). The empirics of agglomeration economies. In J. V. Henderson, G. Duranton, & W. Strange (Eds.), Handbook of regional and urban economics, 5. Amsterdam: North Holland.Google Scholar
  10. Cooper, R., & McLaren, K. (1992). An empirical oriented demand system with improved regularity properties. Canadian Journal of Economics, 25, 652–668.CrossRefGoogle Scholar
  11. Curran, L., Wolman, H., & Hill, E. W. (2006). Economic wellbeing and were we live: accounting for geographical cost of living differences in the US. Urban Studies, 43(13), 2443–2466.CrossRefGoogle Scholar
  12. Davis, O., & Geiger, B. B. (2017). Did food insecurity rise across Europe after the 2008 crisis? An analysis across welfare regimes. Social Policy and Society, 16(3), 343–360.CrossRefGoogle Scholar
  13. Deaton, A. (1988). Quality, quantity and spatial variation of price. American Economic Review, 78(3), 418–430.Google Scholar
  14. Deaton, A., & Muellbauer, J. (1980). An almost ideal demand system. The American Economic Review, 70(3), 312–326.Google Scholar
  15. Desai, A. V. (1969). A spatial index of cost of living. Economic and Political Weekly, 4(27), 1079–1081.Google Scholar
  16. Gibson, J., & Bonggeun, K. (2013). Do the urban poor face higher food prices? Evidence from Vietnam. Food Policy, 41, 193–203.CrossRefGoogle Scholar
  17. Haq, Z., Nazli, H., & Meilke, K. (2008). Implications of high food prices for poverty in Pakistan. Agricultural Economics, 39, 477–484.CrossRefGoogle Scholar
  18. Haworth, C., & Rasmussen, D. (1973). Determinants of metropolitan cost of living variations. Southern Economic Journal, 40(2), 183–192.CrossRefGoogle Scholar
  19. Helpman, E. (1998). The size of regions. In E. D. Pines, E. Sadka, & I. Zilcha (Eds.), Topics in public economics. Cambridge: University Press.Google Scholar
  20. Henderson, J. V. (1974). The size and types of cities. American Economic Review, 64(4), 640–656.Google Scholar
  21. Henderson, J. V. (1987). General equilibrium modeling systems of cities. In Handbook of regional and urban economics (pp. 927–956). Amsterdam: Mills.Google Scholar
  22. Jolliffe, D. & Prydz, Espen B. (2015). Poverty goals and prices: How purchasing power parity matters. Policy Research Working Papers of the World Bank, 7256.Google Scholar
  23. Kakhki, M. D., Shahnoushi, N., & Rezapour, F. (2010). An experimental comparison between demand systems of major food groups in urban economics. American Journal of Applied Sciences, 7(8), 1164–1167.CrossRefGoogle Scholar
  24. Konüs, A. A. (1939). The problem of the true index of the cost of living. Econometrica, 7(1), 10–29.CrossRefGoogle Scholar
  25. Kurre, J. A. (2003). Is the cost of living less in rural areas? International Regional Science Review, 26(1), 86–116.CrossRefGoogle Scholar
  26. Lanaspla, L., Pueyo, F., & Sanz, F. (2003). Evolution of the Spanish Urban structure during the twentieth century. Urban Studies, 40(3), 567–580.CrossRefGoogle Scholar
  27. Lasarte, E., Paredes, D., & Fernández, E. (2015). A true cost of living for Spain using a microeconomic approach and censored data. Spatial Economic Analysis, 10(4), 408–427.CrossRefGoogle Scholar
  28. Lewis, P., & Amdrews, N. (1989). Household demand in China. Applied Economics, 21, 793–807.CrossRefGoogle Scholar
  29. Loveridge, S. & Paredes, D. (2018). Are rural costs of living lower? Evidence from a big mac index approach. International Regional Science Review, 41(3), 364–382.Google Scholar
  30. Majumder, A., Ray, R., & Sinha, K. (2012). Calculating rural-urban food price differentials from unit values in household expenditure surveys: a comparison with existing methods and a new procedure. American Journal of Agricultural Economics, 94(5), 1218–1235.CrossRefGoogle Scholar
  31. Nelson, F. (1991). An inter-state cost of living index. Educational Evaluation and Policy Analysis, 13(1), 103–111.CrossRefGoogle Scholar
  32. Nord, M. (2000). Does it cost less to live in rural areas? Evidence from new data on food security an hunger. Rural Sociology, 65(1), 104–125.CrossRefGoogle Scholar
  33. OECD. (2017). Data and reports on poverty incidence and inequalities in OECD countries. Paris: Organization for Economic Cooperation and Development.Google Scholar
  34. Paredes, D., & Iturra, V. (2013). Substitution bias and the construction of a spatial cost of living index. Papers in Regional Science, 92(1), 103–117.Google Scholar
  35. Polese, M., Rubiera, F., & Shearmur, R. (2007). Observing regularities in location patterns: an analysis of the spatial distribution of economic activity in Spain. European Urban and Regional Studies, 14(2), 157–180.CrossRefGoogle Scholar
  36. Ravallion, M., & Van de Walle, D. (1991). Urban-rural cost of living differentials in a developing economy. Journal of Urban Econmics, 29, 113–127.CrossRefGoogle Scholar
  37. Shonkwiller, J. S., & Yen, S. (1999). Two step estimation of a censored system equations. American Journal of Agricultural Economics, 81(4), 972–982.CrossRefGoogle Scholar
  38. Simon, J. L., & Love, D. O. (1990). City size, prices and efficency for individual goods and services. Annals of Regional Science, 24, 163–175.CrossRefGoogle Scholar
  39. Suedekum, J. (2006). Agglomeration and regional cost of living. Journal of Regional Science, 46(3), 529–543.CrossRefGoogle Scholar
  40. Tabuchi, T. (2001). On interregional price differentials. The Japanese Economic Review, 52(1), 104–115.CrossRefGoogle Scholar
  41. Tabuchi, T., & Thisse, J.-F. (2003). Regional especialization, urban hierarchy and commuting costs. International Economic Review, 47(4), 1295–1317.CrossRefGoogle Scholar
  42. Timmins, C. (2006). Estimating spatial differences in the Brazilian cost of living with household location choices. Journal of Development Economics, 80, 59–83.CrossRefGoogle Scholar
  43. Walden, M. F. (1998). Geographic variation in consumer prices: implications for local price indices. The Journal of Consumer Affairs, 32(2), 204–226.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018

Authors and Affiliations

  1. 1.University of ExtramaduraCaceresSpain
  2. 2.REGIOlab - Regional Economics LaboratoryUniversity of OviedoOviedoSpain

Personalised recommendations