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The price is not always right : on the impacts of (commodity) prices on households (and countries)

  • Lederman, Daniel
  • Porto, Guido

This paper provides an overview of the impact of once-and-for-all changes in commodity prices and other prices on household welfare. It begins with a collection of stylized facts related to commodities based on household survey data from Latin America and Africa. The data uncover strong commodity dependence in both continents: households typically allocate a large fraction of their budget to commodities and they often depend on commodities to earn their income. This income and expenditure dependency suggests sizable impacts and adjustments following commodity-price shocks. The paper explores these effects with a review of the literature. It studies consumption and income responses, labor-market responses, and spillovers across sectors. It ends up providing evidence on the relative magnitudes of various mechanisms through which commodity prices affect household (and national) welfare in developing economies.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6858.

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Date of creation: 01 May 2014
Handle: RePEc:wbk:wbrwps:6858
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