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Food Price Spikes, Price Insulation and Poverty

In: The Economics of Food Price Volatility

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  • Kym Anderson
  • Maros Ivanic
  • Will Martin

Abstract

This paper has two purposes. It first considers the impact on world food prices of the changes in restrictions on trade in staple foods during the 2008 world food price crisis. Those changes—reductions in import protection or increases in export restraints—were meant to partially insulate domestic markets from the spike in international prices. We find that this insulation added substantially to the spike in international prices for rice, wheat, maize and oilseeds. As a result, while domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than in the absence of such insulation. The paper’s second purpose it to estimate the combined impact of such insulating behavior on poverty in various developing countries and globally. We find that the actual poverty-reducing impact of insulation is much less than its apparent impact, and that its net effect was to increase global poverty in 2008 by 8 million, although this increase was not significantly different from zero. Since there are domestic policy instruments such as conditional cash transfers that could now provide social protection for the poor far more efficiently and equitably than variations in border restrictions, we suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike.

(This abstract was borrowed from another version of this item.)

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This chapter was published in:
This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12818.

Handle: RePEc:nbr:nberch:12818

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  1. Ivanic, Maros & Martin, Will & Zaman, Hassan, 2012. "Estimating the Short-Run Poverty Impacts of the 2010–11 Surge in Food Prices," World Development, Elsevier, vol. 40(11), pages 2302-2317.
  2. Anderson, Kym & Nelgen, Signe, 2012. "Agricultural trade distortions during the global financial crisis," CEPR Discussion Papers 9086, C.E.P.R. Discussion Papers.
  3. Christophe Gouel & Sébastien Jean, 2012. "Optimal Food Price Stabilization in a Small Open Developing Country," Working Papers 2012-01, CEPII research center.
  4. Ravallion, Martin & Chen, Shaohua & Sangraula, Prem, 2007. "New evidence on the urbanization of global poverty," Policy Research Working Paper Series 4199, The World Bank.
  5. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
  6. Alderman, Harold & Yemtsov, Ruslan, 2013. "How can safety nets contribute to economic growth ?," Policy Research Working Paper Series 6437, The World Bank.
  7. Pursell, Garry & Gulati, Ashok & Gupta, Kanupriya, 2007. "Distortions to Agricultural Incentives in India," Agricultural Distortions Working Paper 48483, World Bank.
  8. Christine D. Lasco & Robert J. Myers & Richard H. Bernsten, 2008. "Dynamics of rice prices and agricultural wages in the Philippines," Agricultural Economics, International Association of Agricultural Economists, vol. 38(3), pages 339-348, 05.
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Cited by:
  1. Ivanic, Maros & Martin, Will, 2014. "Implications of domestic price insulation for global food price behavior," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 272-288.

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