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The effects of rising food prices on poverty in Mexico

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  • Valero-Gil, Jorge
  • Valero, Magali

Abstract

We evaluate the impact of the rise in food prices during 2006-2008 on the poverty and extreme poverty rates in Mexico. We concentrate on the poor’s consumption of staple foods, and analyze the change in their consumption brought about by changed prices. We also allow households receiving income from the farming and livestock sector to benefit from increases in prices of food products. We find a modest increase in poverty using 2006-2007 prices, however, there is a daunting effect on the poor once the 2008 prices are taken into account. After considering the positive effects of public policies announced in 2008, such as reduced taxes and tariffs on food products and greater subsidies to the extremely poor, the poverty rate measured through consumption increases from 25% to 33.5%, and the extreme poverty rate from 10.58% to 16%, given the increase in food prices. Further analysis using the theory of optimal taxes suggests policies oriented towards relieving the food price pressure on the Mexican poor should aim at lowering the prices of eggs, vegetable oil, milk, and chicken.

Suggested Citation

  • Valero-Gil, Jorge & Valero, Magali, 2008. "The effects of rising food prices on poverty in Mexico," MPRA Paper 10221, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:10221
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    References listed on IDEAS

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    Cited by:

    1. Rita Motzigkeit Gonzalez, 2016. "Welfare effects of changed prices The “Tortilla Crisis" revisited," Working Papers 167, Bavarian Graduate Program in Economics (BGPE).
    2. José Cuesta & Suzanne Duryea & Fidel Jaramillo & Marcos Robles, 2010. "Distributive impacts of the food price crisis in the Andean region," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(7), pages 846-865.
    3. Estrades, Carmen & Terra, María Inés, 2012. "Commodity prices, trade, and poverty in Uruguay," Food Policy, Elsevier, vol. 37(1), pages 58-66.
    4. Miranda, Mario J. & Farrin, Kathleen M. & Larson, Donald F. & Chen, Shu-Ling, 2013. "Differential Effects of Food Security Policies on Subsistence Farmers and the Urban Poor," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149736, Agricultural and Applied Economics Association.
    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. Nora Lustig, 2009. "Coping with Rising Food Prices: Policy Dilemmas in the Developing World," Working Papers id:2241, eSocialSciences.
    7. Countryman, Amanda & Ufer, Danielle, 2016. "Potential Poverty Effects of the Special Safeguard Mechanism: the Case of Wheat," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236023, Agricultural and Applied Economics Association.
    8. Mohsin, Asma & Zaman, Khalid, 2012. "Distributional effects of rising food prices in Pakistan: Evidence from HIES 2001–02 and 2005–06 survey," Economic Modelling, Elsevier, vol. 29(5), pages 1986-1995.
    9. Cuesta, José & Htenas, Aira & Tiwari, Sailesh, 2014. "Monitoring global and national food price crises," Food Policy, Elsevier, vol. 49(P1), pages 84-94.
    10. Naoko Uchiyama, 2016. "Consumption Smoothing, Risk Sharing and Household Vulnerability in Rural Mexico," Discussion Paper Series DP2016-06, Research Institute for Economics & Business Administration, Kobe University.

    More about this item

    Keywords

    Food price changes; Poverty; Mexico;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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