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Household-Level Consumption in Urban Ethiopia: The Impact of Food Price Inflation and Idiosyncratic Shocks

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  • Yonas Alem and Mans Soderbom

Abstract

We use survey data to investigate how urban households in Ethiopia coped with the food price shock in 2008 and idiosyncratic shocks.� Qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008, and that a significant proportion of households had to adjust food consumption in response.� Regression results indicate that households with low asset levels, and casual workers, were particularly adversely affected by high food prices.� In contrast, we find that household demographics and education matter little for the impact of the shock.� Our analysis of idiosyncratic shocks indicates that losing one's job is a serious, uninsurable shock.� We interpret the results as pointing to the importance of growth in the formal sector so as to generate more well-paid and stable jobs.� Our results also imply that aid programs responding to food price shocks can be made more efficient by targeting low-asset households with members on the fringe of the labor market.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2010-24.

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Date of creation: 01 Aug 2010
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Handle: RePEc:oxf:wpaper:csae-wps/2010-24

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Keywords: Consumption; food price inflation; shocks; Africa; urban Ethiopia;

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References

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  1. Stefan Dercon, 2003. "Growth and Shocks: evidence from rural Ethiopia," Economics Series Working Papers WPS/2003-12, University of Oxford, Department of Economics.
  2. Bigsten, Arne & Shimeles, Abebe, 2008. "Poverty Transition and Persistence in Ethiopia: 1994-2004," World Development, Elsevier, vol. 36(9), pages 1559-1584, September.
  3. Loening, Josef L. & Durevall, Dick & Birru, Yohannes A., 2009. "Inflation dynamics and food prices in an agricultural economy : the case of Ethiopia," Policy Research Working Paper Series 4969, The World Bank.
  4. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
  5. Arne Bigsten & Mulu Gebreeyesus & Mans Soderbom, 2009. "Gradual Trade Liberalization and Firm Performance in Ethiopia," CSAE Working Paper Series 2009-21, Centre for the Study of African Economies, University of Oxford.
  6. Glewwe, Paul & Hall, Gillette, 1998. "Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru," Journal of Development Economics, Elsevier, vol. 56(1), pages 181-206, June.
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Cited by:
  1. Laura Kiku Rodriguez-Takeuchi & Katsushi S. Imai, 2011. "Food Price Surges and Poverty in Urban Colombia: New Evidence from Household Survey Data," Discussion Paper Series DP2011-33, Research Institute for Economics & Business Administration, Kobe University.

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