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Poverty effects of higher food prices : a global perspective

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  • De Hoyos, Rafael E.
  • Medvedev, Denis

Abstract

The spike in food prices between 2005 and the first half of 2008 has highlighted the vulnerabilities of poor consumers to higher prices of agricultural goods and generated calls for massive policy action. This paper provides a formal assessment of the direct and indirect impacts of higher prices on global poverty using a representative sample of 63 to 93 percent of the population of the developing world. To assess the direct effects, the paper uses domestic food consumer price data between January 2005 and December 2007--when the relative price of food rose by an average of 5.6 percent --to find that the implied increase in the extreme poverty headcount at the global level is 1.7 percentage points, with significant regional variation. To take the second-order effects into account, the paper links household survey data with a global general equilibrium model, finding that a 5.5 percent increase in agricultural prices (due to rising demand for first-generation biofuels) could raise global poverty in 2010 by 0.6 percentage points at the extreme poverty line and 0.9 percentage points at the moderate poverty line. Poverty increases at the regional level vary substantially, with nearly all of the increase in extreme poverty occurring in South Asia and Sub-Saharan Africa.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4887.

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Date of creation: 01 Mar 2009
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Handle: RePEc:wbk:wbrwps:4887

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Keywords: Rural Poverty Reduction; Food&Beverage Industry; Poverty Lines; Emerging Markets;

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  1. Bussolo, Maurizio & De Hoyos, Rafael & Medvedev, Denis, 2009. "Global income distribution and poverty in the absence of agricultural distortions," Policy Research Working Paper Series 4849, The World Bank.
  2. Ravallion, Martin & van de Walle, Dominique, 1991. "The impact on poverty of food pricing reforms: A welfare analysis for Indonesia," Journal of Policy Modeling, Elsevier, Elsevier, vol. 13(2), pages 281-299.
  3. Maurizio Bussolo & Rafael E De Hoyos & Denis Medvedev, 2010. "Economic growth and income distribution: linking macro-economic models with household survey data at the global level," International Journal of Microsimulation, Interational Microsimulation Association, vol. 3(1), pages 92-103.
  4. Jed Friedman & James Levinsohn, 2002. "The Distributional Impacts of Indonesia's Financial Crisis on Household Welfare: A "Rapid Response" Methodology," World Bank Economic Review, World Bank Group, World Bank Group, vol. 16(3), pages 397-423, December.
  5. Bussolo, Maurizio & Lay, Jann & van der Mensbrugghe, Dominique, 2006. "Structural change and poverty reduction in Brazil : the impact of the Doha Round," Policy Research Working Paper Series 3833, The World Bank.
  6. Gero Carletto & Katia Covarrubias & Benjamin Davis & Marika Krausova & Kostas Stamoulis & Paul Winters & Alberto Zezza, 2007. "Rural income generating activities in developing countries: re-assessing the evidence," The Electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization of the United Nations, Food and Agriculture Organization of the United Nations, vol. 4(1), pages 146-193.
  7. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
  8. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2002. "Estimating consumer demands across the development spectrum: maximum likelihood estimates of an implicit direct additivity model," Journal of Development Economics, Elsevier, Elsevier, vol. 68(2), pages 289-307, August.
  9. Wodon, Quentin & Tsimpo, Clarence & Backiny-Yetna, Prospere & Joseph, George & Adoho, Franck & Coulombe, Harold, 2008. "Potential impact of higher food prices on poverty : summary estimates for a dozen west and central African countries," Policy Research Working Paper Series 4745, The World Bank.
  10. Martin, Will & Mitra, Devashish, 1999. "Productivity growth and convergence in agriculture and manufacturing," Policy Research Working Paper Series 2171, The World Bank.
  11. Shaohua Chen & Martin Ravallion, 2004. "Welfare Impacts of China's Accession to the World Trade Organization," World Bank Economic Review, World Bank Group, World Bank Group, vol. 18(1), pages 29-57.
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