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Food price spikes, price insulation, and poverty

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  • Anderson, Kym
  • Ivanic, Maros
  • Martin, Will

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. The authors find that this insulation added substantially to the spike in international prices for rice, wheat, maize, and oilseeds. As a result, although domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than they would have 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. The analysis finds 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 people, 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, the authors suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6535.

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Date of creation: 01 Jul 2013
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Handle: RePEc:wbk:wbrwps:6535

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Keywords: Markets and Market Access; Emerging Markets; Food&Beverage Industry; Access to Markets; Rural Poverty Reduction;

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  1. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
  2. Ivanic, Maros & Martin, Will & Zaman, Hassan, 2011. "Estimating the short-run poverty impacts of the 2010-11 surge in food prices," Policy Research Working Paper Series 5633, The World Bank.
  3. Kym Anderson, 2012. "Agricultural Trade Distortions During the Global Financial Crisis," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2012-05, The Australian National University, Arndt-Corden Department of Economics.
  4. Alderman, Harold & Yemtsov, Ruslan, 2013. "How can safety nets contribute to economic growth ?," Policy Research Working Paper Series 6437, The World Bank.
  5. Pursell, Garry & Gulati, Ashok & Gupta, Kanupriya, 2007. "Distortions to Agricultural Incentives in India," Agricultural Distortions Working Paper, World Bank 48483, World Bank.
  6. 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.
  7. Christophe Gouel & Sébastien Jean, 2012. "Optimal Food Price Stabilization in a Small Open Developing Country," Working Papers 2012-01, CEPII research center.
  8. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2007. "New Evidence on the Urbanization of Global Poverty," Population and Development Review, The Population Council, Inc., The Population Council, Inc., vol. 33(4), pages 667-701.
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Cited by:
  1. Brian Wright, 2014. "Global Biofuels: Key to the Puzzle of Grain Market Behavior," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 28(1), pages 73-98, Winter.
  2. Ivanic, Maros & Martin, Will, 2014. "Implications of domestic price insulation for global food price behavior," Journal of International Money and Finance, Elsevier, Elsevier, vol. 42(C), pages 272-288.
  3. Donald MacLaren, 2014. "The Special Safeguard Mechanism (SSM) and Tariffs: Price Behaviour with Imperfectly Competitive Market Intermediaries," CESifo Working Paper Series 4585, CESifo Group Munich.

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