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Food Price Spikes, Price Insulation, and Poverty

  • Kym Anderson
  • Maros Ivanic
  • Will Martin

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.

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File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2013/wp_econ_2013_11.pdf
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Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2013-11.

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Length: 50 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:pas:papers:2013-11
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  1. Christophe Gouel & Sébastien Jean, 2015. "Optimal food price stabilization in a small open developing country," Working Papers 274047, Institut National de la Recherche Agronomique, France.
  2. Alderman, Harold & Yemtsov, Ruslan, 2013. "How can safety nets contribute to economic growth ?," Policy Research Working Paper Series 6437, The World Bank.
  3. 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.
  4. Martin, Will & Anderson, Kym, 2011. "Export restrictions and price insulation during commodity price booms," Policy Research Working Paper Series 5645, The World Bank.
  5. Pursell, Garry & Gulati, Ashok & Gupta, Kanupriya, 2007. "Distortions to Agricultural Incentives in India," Agricultural Distortions Working Paper 48483, World Bank.
  6. 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, 05.
  7. Ivanic, Maros & Martin, Will & Zaman, Hassan, 2011. "Estimating the short-run poverty impacts of the 2010-11 surge in food prices," Policy Research Working Paper Series 5633, The World Bank.
  8. Ravallion, Martin & Chen, Shaohua & Sangraula, Prem, 2007. "New evidence on the urbanization of global poverty," Policy Research Working Paper Series 4199, The World Bank.
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