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

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  • Lederman, Daniel
  • Porto, Guido

Abstract

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.

Suggested Citation

  • Lederman, Daniel & Porto, Guido, 2014. "The price is not always right : on the impacts of (commodity) prices on households (and countries)," Policy Research Working Paper Series 6858, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6858
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    Cited by:

    1. Kuma, Tadesse & Dereje, Mekdim & Hirvonen, Kalle & Minten, Bart, 2016. "Cash crops and food security: Evidence from Ethiopian smallholder coffee producers," ESSP working papers 95, International Food Policy Research Institute (IFPRI).
    2. Nicolas Depetris-Chauvin & Guido Porto, 2014. "Agricultural Supply Chains and Farmers Constraints: Welfare Impacts in ECOWAS Countries," Working Papers 2014-20, CEPII research center.
    3. Ulrik Beck & Saurabh Singhal & Finn Tarp, 2016. "Coffee price volatility and intra-household labour supply," WIDER Working Paper Series 016, World Institute for Development Economic Research (UNU-WIDER).

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    Keywords

    Markets and Market Access; Economic Theory&Research; Emerging Markets; Labor Policies; Access to Markets;

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