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Did the commodity price spike increase rural poverty? Evidence from a long-run panel in Bangladesh

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  • Joseph V. Balagtas
  • Humnath Bhandari
  • Ellanie R. Cabrera
  • Samarendu Mohanty
  • Mahabub Hossain

Abstract

We assess the effects of the dramatic rise in agricultural commodity prices during 2007–2008 on income dynamics and poverty among rural households in Bangladesh. A unique panel data set allows us to put the effects of recent events in the context of long-run trends in income and poverty. We use data from a nationally representative longitudinal survey of rural households in Bangladesh collected in four waves in 1988, 2000, 2004, and 2008. Nargis and Hossain (Nargis, N., Hossain, M., 2006. Income dynamics and pathways out of rural poverty in Bangladesh, 1988–2004. Agric. Econ. 35, 425–435) analysed income dynamics and poverty incidence for the first three waves, finding a declining trend in both the incidence and severity of poverty, aided in particular by human capital development and off-farm employment opportunities. We update and extend the analysis to include data collected in 2008, at the height of a spike in agricultural prices. We find that the price of a balanced food basket increased by more than 50% during 2000–2008, while household income rose only 15%. As a result the incidence and severity of rural poverty in Bangladesh sunk to pre-2000 levels during 2004–2008. Thus, the price spikes in 2007–2008 helped push an additional 13 million people into poverty in rural Bangladesh. Moreover, we find that the determinants of poverty have not been time-invariant. In particular, agricultural production, which had previously been associated with a higher incidence of poverty, served as a hedge against higher food prices during 2004–2008.

Suggested Citation

  • Joseph V. Balagtas & Humnath Bhandari & Ellanie R. Cabrera & Samarendu Mohanty & Mahabub Hossain, 2014. "Did the commodity price spike increase rural poverty? Evidence from a long-run panel in Bangladesh," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 303-312, May.
    • Handle: RePEc:bla:agecon:v:45:y:2014:i:3:p:303-312
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    File URL: http://hdl.handle.net/10.1111/agec.12066
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    References listed on IDEAS

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    1. Sen, Binayak, 2003. "Drivers of Escape and Descent: Changing Household Fortunes in Rural Bangladesh," World Development, Elsevier, vol. 31(3), pages 513-534, March.
    2. Maros Ivanic & Will Martin, 2008. "Implications of higher global food prices for poverty in low‐income countries1," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 405-416, November.
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    6. Nigar Nargis & Mahabub Hossain, 2006. "Income dynamics and pathways out of rural poverty in Bangladesh, 1988–2004," Agricultural Economics, International Association of Agricultural Economists, vol. 35(s3), pages 425-435, November.
    7. Derek Headey & Shenggen Fan, 2008. "Anatomy of a crisis: the causes and consequences of surging food prices," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 375-391, November.
    8. Wood, Benjamin D.K. & Nelson, Carl H. & Nogueira, Lia, 2012. "Poverty effects of food price escalation: The importance of substitution effects in Mexican households," Food Policy, Elsevier, vol. 37(1), pages 77-85.
    9. Christopher Scott, 2000. "Mixed fortunes: A study of poverty mobility among small farm households in Chile, 1968-86," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 155-180.
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    11. World Bank, 2011. "Migration and Remittances Factbook 2011 : Second Edition," World Bank Publications, The World Bank, number 2522, June.
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    Cited by:

    1. Headey, Derek D. & Hoddinott, John, 2016. "Agriculture, nutrition and the green revolution in Bangladesh," Agricultural Systems, Elsevier, vol. 149(C), pages 122-131.
    2. Elleby, Christian, 2014. "Poverty and Price Transmission," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182722, European Association of Agricultural Economists.
    3. Mottaleb, K. & Erenstein, O., 2018. "Gender Differentiated Impacts of Commodity Price Shocks on Households’ Consumption Behavior: A Natural Experiment," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275915, International Association of Agricultural Economists.
    4. repec:ebl:ecbull:eb-18-00829 is not listed on IDEAS

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