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Welfare Impacts of Food Price Inflation in Ethiopia

  • Klugman, Jeni
  • Loening, Josef

In Ethiopia, changes in the prices of teff, wheat and maize tend to affect more the people at the higher income quintile in rural areas, while in urban areas they tend to affect those at the lower income quintiles. The hike in relative prices from 2006-2007 has increased the urban cost of living by 8-12 percent in urban areas. Inflation could worsen urban income inequality significantly. Demand for teff, maize and wheat tends to be elastic, with evidence of substitutability, especially between teff and wheat. In urban areas, all three types of cereals tended to be necessities, with inelastic price responses. Measuring the rural welfare impact of inflation for households is challenging, given the simultaneous production and consumption decisions and responsiveness of consumption decisions to price and incomes. Overall, it appears that rises in the relative price of food tends to benefit rural households in Ethiopia, though the exact magnitude needs to be investigated further.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24892.

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Date of creation: 15 Dec 2007
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Handle: RePEc:pra:mprapa:24892
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  1. Budd, John W, 1993. "Changing Food Prices and Rural Welfare: A Nonparametric Examination of the Cote d'Ivoire," Economic Development and Cultural Change, University of Chicago Press, vol. 41(3), pages 587-603, April.
  2. James Levinsohn & Margaret McMillan, 2005. "Does Food Aid Harm the Poor? Household Evidence from Ethiopia," NBER Working Papers 11048, National Bureau of Economic Research, Inc.
  3. Awudu Abdulai & Christopher Delgado, 2000. "An Empirical Investigation of Short- and Long-run Agricultural Wage Formation in Ghana," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 169-185.
  4. Luc Christiaensen & Lionel Demery, 2007. "Down to Earth : Agriculture and Poverty Reduction in Africa," World Bank Publications, The World Bank, number 6624.
  5. Minot, Nicholas & Goletti, Francesco, 2000. "Rice market liberalization and poverty in Viet Nam:," Research reports 114, International Food Policy Research Institute (IFPRI).
  6. Ravallion, Martin, 1990. "Rural Welfare Effects of Food Price Changes under Induced Wage Responses: Theory and Evidence for Bangladesh," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 574-85, July.
  7. Christopher B. Barrett & Paul A. Dorosh, 1996. "Farmers' Welfare and Changing Food Prices: Nonparametric Evidence from Rice in Madagascar," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 656-669.
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