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The Impact of Domestic and International Commodity Price Volatility on Agricultural Income Instability: Ghana, Vietnam and Peru

  • Rapsomanikis, George
  • Sarris, Alexander
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    The extent to which commodity price volatility affects the income of producing households and their vulnerability to poverty and food insecurity depends on household diversification patterns and the degree of their exposure to markets. This article focuses on estimating agricultural income uncertainties for a number of different household types in Ghana, Vietnam and Peru. We develop explicit formulae for household income variance, and we combine information from household datasets and commodity price time-series in order to estimate the income uncertainty that emanates from price and production volatility under different scenarios of exposure to international and domestic markets shocks. Our results indicate that market and nonmarket uncertainties significantly affect the variability of agricultural income of households in these countries, and especially households that are specialized in a few commodities. However, it turns out that, under current policies, almost all of their income variability is due to domestic factors, with international prices not contributing much, at least in the short run. Wider exposure to international markets would increase the income variability of producers who have been subjected to domestic market stabilization policies in Ghana and Vietnam, while it would decrease it in the case of Peru.

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    File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2006/dp2006-04.pdf
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    Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number DP2006/04.

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    Length: 24 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:unu:wpaper:dp2006-04
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    10. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989. "Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India," Bulletins 7487, University of Minnesota, Economic Development Center.
    11. Diaz-Bonilla, Eugenio & Thomas, Marcelle & Robinson, Sherman & Cattaneo, Andrea, 2000. "Food security and trade negotiations in the World Trade Organization," TMD discussion papers 59, International Food Policy Research Institute (IFPRI).
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    13. Sarris, Alexander, 2002. "The demand for commodity insurance by developing country agricultural producers - theory and an application to cocoa in Ghana," Policy Research Working Paper Series 2887, The World Bank.
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