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How does food price increase affect Ugandan households?: An augmented multimarket approach

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  • Ulimwengu, John M.
  • Ramadan, Racha

Abstract

"Almost unaffected by the 2008 wave of soaring world food prices, Ugandan local market prices exhibit signs of high price volatility in the first quarter of 2009. At the household level, while net producers may reap some benefits from this increase in food prices, net consumers are more likely to suffer from it. However, the net consumption impact of food price increase is not as straightforward as reported in previous studies. In this paper, we extend Singh et al. (1986) multimarket model by adding demand elasticities from the Almost Ideal Demand System (AIDS). We use the integrated Ugandan National Household Survey (UNHS) 2005/2006 to estimate a measure of net consumption impact that includes both price and profit effects. Overall, we found that household welfare is expected to decrease with loss in consumption and increase with income gain as a result of higher food prices for the cereals producers. Simulating change in cereals consumption induced by a 50 percent increase in cereals price and taking into account the profit effect, our results predict a 23 percent decrease in food consumption for net sellers, compared with 44 percent when using the consumption approach alone. Accounting for such substitution effects, our results suggest that the impact of rising food prices may be mitigated because some households will attempt to substitute more expensive food items with cheaper ones; however, this apparent coping strategy often leads to a much poorer diet. The results suggest that the majority of households with expected positive income impact, the gainers, live in rural areas. These households also tend to have better access to agricultural services than the nongainers." from authors' abstract

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 884.

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Date of creation: 2009
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Handle: RePEc:fpr:ifprid:884

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Related research

Keywords: Consumption; Elasticity; Food prices; households; Multimarket; Science and technology; Institutional change; Innovation systems; Supply and demand; Household resource allocation; Gender;

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References

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  1. von Braun, Joachim & Ahmed, Akhter & Asenso-Okyere, Kwadwo & Fan, Shenggen & Gulati, Ashok & Hoddinott, John & Pandya-Lorch, Rajul & Rosegrant, Mark W. & Ruel, Marie & Torero, Maximo & van Rheenen, Te, 2008. "High food prices: The what, who, and how of proposed policy actions," Policy briefs 1A, International Food Policy Research Institute (IFPRI).
  2. McKay, Lloyd & Lawrence, Denis & Vlastuin, Chris, 1983. "Profit, Output Supply, and Input Demand Functions for Multiproduct Firms: The Case of Australian Agriculture," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(2), pages 323-39, June.
  3. André Croppenstedt & Lorenzo Giovanni Bellú & Fabrizio Bresciani & Stefania DiGiuseppe, 2007. "Agricultural Policy Impact Analysis with Multi-Market Models: A Primer," Working Papers 07-26, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  4. Minten, Bart & Barrett, Christopher B., 2008. "Agricultural Technology, Productivity, and Poverty in Madagascar," World Development, Elsevier, vol. 36(5), pages 797-822, May.
  5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  6. Benson, Todd & Minot, Nicholas & Pender, John & Robles, Miguel & von Braun, Joachim, 2008. "Global food crises: Monitoring and assessing impact to inform policy responses," Food policy reports 19, International Food Policy Research Institute (IFPRI).
  7. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
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Citations

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Cited by:
  1. Fousseini TRAORE & Félix BADOLO, 2012. "Impact of Rising World Rice Prices on Poverty and Inequality in Burkina Faso," Working Papers 201222, CERDI.
  2. José Cuesta & Suzanne Duryea & Fidel Jaramillo & Marcos Robles, 2010. "Distributive impacts of the food price crisis in the Andean region," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(7), pages 846-865.
  3. Minot, Nicholas & Dewina, Reno, 2013. "Impact of food price changes on household welfare in Ghana:," IFPRI discussion papers 1245, International Food Policy Research Institute (IFPRI).

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