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Welfare Impacts of Food Price Inflation in Ethiopia

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  • Klugman, Jeni
  • Loening, Josef

Abstract

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.

Suggested Citation

  • Klugman, Jeni & Loening, Josef, 2007. "Welfare Impacts of Food Price Inflation in Ethiopia," MPRA Paper 24892, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24892
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    File URL: https://mpra.ub.uni-muenchen.de/24892/1/MPRA_paper_24892.pdf
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    References listed on IDEAS

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    4. 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 574-585, July.
    5. 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.
    6. Luc Christiaensen & Lionel Demery, 2007. "Down to Earth : Agriculture and Poverty Reduction in Africa," World Bank Publications, The World Bank, number 6624, April.
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    Citations

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    Cited by:

    1. Minten, Bart & Stifel, David & Tamru, Seneshaw, 2012. "Structural Transformation in Ethiopia: Evidence from Cereal Markets:," ESSP research notes 14, International Food Policy Research Institute (IFPRI).
    2. Tefera, Nigussie, 2012. "Welfare Impacts of Rising Food Prices in Rural Ethiopia: a Quadratic Almost Ideal Demand System Approach," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126698, International Association of Agricultural Economists.
    3. Wodon, Quentin & Tsimpo, Clarence & Backiny-Yetna, Prospere & Joseph, George & Adoho, Franck & Coulombe, Harold, 2008. "Potential impact of higher food prices on poverty : summary estimates for a dozen west and central African countries," Policy Research Working Paper Series 4745, The World Bank.
    4. Benfica, Rui M.S., 2012. "Welfare and Distributional Impacts of Price Shocks in Malawi: A Non-Parametric Approach," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125394, International Association of Agricultural Economists.
    5. Yonas Alem & Gunnar Köhlin, 2014. "The Impact of Food Price Inflation on Subjective Well-being: Evidence From Urban Ethiopia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 116(3), pages 853-868, May.
    6. Loening, Josef L. & Durevall, Dick & Ayalew Birru, Yohannes, 2009. "Inflation Dynamics and Food Prices in an Agricultural Economy: The Case of Ethiopia," Working Papers in Economics 347, University of Gothenburg, Department of Economics.
    7. Félix Badolo & Fousseini Traore, 2012. "Impact of Rising World Rice Prices on Poverty and Inequality in Burkina Faso," Working Papers halshs-00713258, HAL.
    8. Wodon, Quentin & Tsimpo, Clarence & Coulombe, Harold, 2008. "Assessing the potential impact on poverty of rising cereals prices : the case of Ghana," Policy Research Working Paper Series 4740, The World Bank.
    9. Loening, Josef & Mikael Imru, Laketch, 2009. "Ethiopia: Diversifying the Rural Economy. An Assessment of the Investment Climate for Small and Informal Enterprises," MPRA Paper 23278, University Library of Munich, Germany.
    10. Wodon, Quentin & Zaman, Hassan, 2008. "Rising food prices in Sub-Saharan Africa : poverty impact and policy responses," Policy Research Working Paper Series 4738, The World Bank.

    More about this item

    Keywords

    Poverty; food prices; Ethiopia;

    JEL classification:

    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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