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Poverty and Growth Impacts of High Oil Prices: Evidence from Sri Lanka

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  • Naranpanawa, Athula
  • Bandara, Jayathileka S.

Abstract

The “twin shocks” of rising food and oil prices in 2007 and 2008 caused negative impacts on developing countries in terms of poverty reduction and economic growth. Many analysts believe that a similar crisis is looming on the horizon after the world food price index hit the 2008 peak in December last year and the oil price in the UK reached the price level it had two years ago in January 2011. However, there is a limited body of empirical evidence available from developing countries on the impact of high oil prices on growth in general and household poverty in particular. In this study, Sri Lanka is used as a case study and a computable general equilibrium (CGE) approach is adopted as an analytical framework to explore the growth and poverty impacts of high oil prices. The preliminary results suggest that urban low income households are the group most adversely affected by high global oil prices, followed by low income rural households. In contrast, estate low income households are the least affected out of all low income households. The energy intensive manufacturing sector and services sector are affected most compared to the agricultural sector.

Suggested Citation

  • Naranpanawa, Athula & Bandara, Jayathileka S., 2011. "Poverty and Growth Impacts of High Oil Prices: Evidence from Sri Lanka," Conference papers 332139, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332139
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    References listed on IDEAS

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    1. Grant, Jason H. & Meilke, Karl D., 2009. "Triggers, Remedies, and Tariff Cuts: Assessing the Impact of a Special Safeguard Mechanism for Developing Countries," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 10(1), pages 1-24, May.
    2. Blair, Roger D, 1974. "Random Input Prices and the Theory of the Firm," Economic Inquiry, Western Economic Association International, vol. 12(2), pages 214-226, June.
    3. Finger, J. Michael, 2009. "A special safeguard mechanism for agricultural imports and the management of reform," Policy Research Working Paper Series 4927, The World Bank.
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