Food scares and asymmetric price transmission: the case of the pork market in China

This paper investigates the symmetry of impact from three main food scare events on both the upstream and downstream price transmissions in the Chinese pork market through monthly data from 2001 to 2014. Based on a theoretical model, we firstly estimate the VAR systems for pork retail price and price transmissions in different links, and then plot the impulse response function and dynamic multiplier function respectively for endogenous substitute good price and exogenous food scare events. Empirical results indicate the asymmetry of price transmission in the Chinese pork market, and demand and supply shocks from three food scare incidents are found to impact retail price and price transmissions differentially. In addition, shocks from the same incident on price and price transmissions are significantly different. This research provides implications for farmers, business managers and policy makers to make strategies in response to food scare events.