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Impact of a Commodity Price Spike on Poverty Dynamics: Evidence from a Panel of Rural Households in Bangladesh

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  • Balagtas, Joseph Valdes
  • Bhandari, Humnath
  • Mohanty, Samarendu
  • Cabrera, Ellanie
  • Hossain, Mahabub

Abstract

In this paper 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. 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 (2006) analysed income dynamics and poverty incidence for the first three waves, finding a declining trend in both the incidence and depth of poverty, aided by in particular by human capital development and the off-farm labor opportunities. Here we update the analysis to include data collected in 2008, at the height of the aforementioned spike in agricultural prices. We find that various measures of rural poverty in Bangladesh had sunk back to pre-2000 levels. The price of a balanced food basket more than doubled from 2000-2008, while household incomes rose only 15 percent during the same time period. We present updated analysis of income determinants and document a reduction in upward poverty mobility during 2004-2008. Moreover, we present new analysis that suggests that determinants of poverty have not been time-invariant.

Suggested Citation

  • Balagtas, Joseph Valdes & Bhandari, Humnath & Mohanty, Samarendu & Cabrera, Ellanie & Hossain, Mahabub, 2012. "Impact of a Commodity Price Spike on Poverty Dynamics: Evidence from a Panel of Rural Households in Bangladesh," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124225, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare12:124225
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    References listed on IDEAS

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    1. Jyotsna Jalan & Martin Ravallion, 2000. "Is transient poverty different? Evidence for rural China," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 82-99.
    2. Thomas W. Hertel & Roman Keeney & Maros Ivanic & L. Alan Winters, 2007. "Distributional effects of WTO agricultural reforms in rich and poor countries," Economic Policy, CEPR;CES;MSH, vol. 22, pages 289-337, April.
    3. Ahmed, Sadiq, 2008. "Global Food Price Inflation: Implications for South Asia, Policy Reactions, and Future Challenges," Policy Research Working Paper Series 4796, The World Bank.
    4. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
    5. 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.
    6. Sen, Binayak, 2003. "Drivers of Escape and Descent: Changing Household Fortunes in Rural Bangladesh," World Development, Elsevier, vol. 31(3), pages 513-534, March.
    7. Mellor, John W, 1978. "Food Price Policy and Income Distribution in Low-Income Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 27(1), pages 1-26, October.
    8. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
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    Keywords

    Demand and Price Analysis; Food Security and Poverty;

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