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The impact of food inflation on urban poverty and its monetary cost: some back-of-the-envelope calculations

  • Sébastien Dessus
  • Santiago Herrera
  • Rafael de Hoyos

This article uses a sample of 72 developing countries to estimate the change in the cost of alleviating urban poverty brought about by the recent increase in food prices. This cost is approximated by the change in the poverty deficit (PD), that is, the variation in financial resources required to eliminate poverty under perfect targeting. The results show that, for most countries, the cost represents less than 0.2% of gross domestic product. However, in the most severely affected, it may exceed 3%. In all countries, the change in the PD is mostly due to the negative real income effect of those households that were poor before the price shock, while the cost attributable to new households falling into poverty is negligible. Thus, in countries where transfer mechanisms with effective targeting already exist, the most cost-effective strategy would be to scale up such programs rather than designing tools to identify the new poor. Copyright (c) 2008 International Association of Agricultural Economists.

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Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 39 (2008)
Issue (Month): s1 (November)
Pages: 417-429

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Handle: RePEc:bla:agecon:v:39:y:2008:i:s1:p:417-429
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  1. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  2. Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins 33580, United States Department of Agriculture, Economic Research Service.
  3. Jed Friedman & James Levinsohn, 2001. "The Distributional Impacts of Indonesia's Financial Crisis on Household Welfare: "A Rapid Response Methodology"," William Davidson Institute Working Papers Series 387, William Davidson Institute at the University of Michigan.
  4. Yoko Niimi, 2005. "An Analysis of Household Responses to Price Shocks in Vietnam: Can Unit Values Substitute for Market Prices?," PRUS Working Papers 30, Poverty Research Unit at Sussex, University of Sussex.
  5. 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.
  6. Charles Ackah, & Simon Appleton, . "Food Price Changes and Consumer Welfare in Ghana in the 1990s," Discussion Papers 07/03, University of Nottingham, CREDIT.
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