Impacts of Rising Food Prices on Poverty and Welfare in Vietnam

This paper examines the impacts of rising food prices on poverty and welfare in Vietnam. Increases in food prices raise the real incomes of those selling food, but reduce the welfare of net food purchasers. Overall, the net impact of higher food prices on an average Vietnamese household's welfare is positive. However, the benefits and costs are not spread evenly across the population. A majority of the population would be worse off from increases in food prices. More specifically, a uniform increase in both food consumer and producer prices would reduce the welfare of 56 percent of Vietnamese households. Similarly, a uniform increase in the price of rice would reduce the welfare of about 54 percent of rural households and about 92 percent of urban households. The reason why average household welfare increases is that the average welfare loss of the households whose welfare declines (net purchasers) is smaller than the average welfare gain of the households whose welfare increases (net sellers). A relatively small increase in food prices reduces poverty rate slightly because poorer households in Vietnam tend to be net sellers. However, a large food price increase, for example a 50 percent increase, may increase the poverty rate.