Food Price Spikes, Price Insulation, and Poverty

The analysis in this paper first considers the impact on world food prices of the changes in protection for staple foods during the 2008 world food price crisis—changes that were generally designed to partially insulate domestic markets from changes in international prices. We find that this insulation substantially increased world prices for key food crops such as rice, wheat, maize and oilseeds. The net effect was to reduce domestic prices in only a few developing countries, while domestic prices in many other countries were increased despite their attempts to insulate against the price rises. We estimate that the overall reduction in import protection or increase in export restraints in developing countries reduced the extent to which global poverty would otherwise have risen. However, the actual poverty-reducing impact of insulation is much less than its apparent impact, and there are now domestic policy instruments that almost certainly could reduce the impact of higher food prices on the poor more efficiently than variations in trade restrictions.(This abstract was borrowed from another version of this item.)