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Food Price Spikes, Price Insulation, and Poverty

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  • Anderson, Kym
  • Martin, Will
  • Ivanic, Maros

Abstract

This paper has two purposes. It first considers the impact on world food prices of the changes in restrictions on trade in staple foods during the 2008 world food price crisis. Those changes?reductions in import protection or increases in export restraints?were meant to partially insulate domestic markets from the spike in international prices. We find that this insulation added substantially to the spike in international prices for rice, wheat, maize and oilseeds. As a result, while domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than in the absence of such insulation. The paper?s second purpose it to estimate the combined impact of such insulating behavior on poverty in various developing countries and globally. We find that the actual poverty-reducing impact of insulation is much less than its apparent impact, and that its net effect was to increase global poverty in 2008 by 8 million, although this increase was not significantly different from zero. Since there are domestic policy instruments such as conditional cash transfers that could now provide social protection for the poor far more efficiently and equitably than variations in border restrictions, we suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike.

Suggested Citation

  • Anderson, Kym & Martin, Will & Ivanic, Maros, 2013. "Food Price Spikes, Price Insulation, and Poverty," CEPR Discussion Papers 9555, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9555
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    References listed on IDEAS

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    1. Christophe Gouel & Sébastien Jean, 2015. "Optimal Food Price Stabilization in a Small Open Developing Country," The World Bank Economic Review, World Bank Group, vol. 29(1), pages 72-101.
    2. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
    3. 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.
    4. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2007. "New Evidence on the Urbanization of Global Poverty," Population and Development Review, The Population Council, Inc., vol. 33(4), pages 667-701, December.
    5. Christine D. Lasco & Robert J. Myers & Richard H. Bernsten, 2008. "Dynamics of rice prices and agricultural wages in the Philippines," Agricultural Economics, International Association of Agricultural Economists, vol. 38(3), pages 339-348, May.
    6. Hanan G. Jacoby, 2016. "Food Prices, Wages, And Welfare In Rural India," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 159-176, January.
    7. Kym Anderson & Signe Nelgen, 2012. "Agricultural trade distortions during the global financial crisis," Oxford Review of Economic Policy, Oxford University Press, vol. 28(2), pages 235-260, SUMMER.
    8. Harold Alderman & Ruslan Yemtsov, 2014. "How Can Safety Nets Contribute to Economic Growth?," The World Bank Economic Review, World Bank Group, vol. 28(1), pages 1-20.
    9. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications - Books, The World Bank Group, number 2611, December.
    10. Ivanic, Maros & Martin, Will & Zaman, Hassan, 2012. "Estimating the Short-Run Poverty Impacts of the 2010–11 Surge in Food Prices," World Development, Elsevier, vol. 40(11), pages 2302-2317.
    11. 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.
    12. Kym Anderson, 2009. "Distortions to Agricultural Incentives : A Global Perspective, 1955-2007," World Bank Publications - Books, The World Bank Group, number 9436, December.
    13. Thomas W. Hertel & L. Alan Winters, 2006. "Poverty and the WTO : Impacts of the Doha Development Agenda," World Bank Publications - Books, The World Bank Group, number 7411, December.
    14. Pursell, Garry & Gulati, Ashok & Gupta, Kanupriya, 2007. "Distortions to Agricultural Incentives in India," Agricultural Distortions Working Paper Series 48483, World Bank.
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    More about this item

    Keywords

    Commodity price stabilization; Domestic market insulation; International price transmission; Loss aversion;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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