Did the commodity price spike increase rural poverty? Evidence from a long‐run panel in Bangladesh

We assess the effects of the dramatic rise in agricultural commodity prices during 2007–2008 on income dynamics and poverty among rural households in Bangladesh. A unique panel data set allows us to put the effects of recent events in the context of long‐run trends in income and poverty. We use data from a nationally representative longitudinal survey of rural households in Bangladesh collected in four waves in 1988, 2000, 2004, and 2008. Nargis and Hossain (Nargis, N., Hossain, M., 2006. Income dynamics and pathways out of rural poverty in Bangladesh, 1988–2004. Agric. Econ. 35, 425–435) analysed income dynamics and poverty incidence for the first three waves, finding a declining trend in both the incidence and severity of poverty, aided in particular by human capital development and off‐farm employment opportunities. We update and extend the analysis to include data collected in 2008, at the height of a spike in agricultural prices. We find that the price of a balanced food basket increased by more than 50% during 2000–2008, while household income rose only 15%. As a result the incidence and severity of rural poverty in Bangladesh sunk to pre‐2000 levels during 2004–2008. Thus, the price spikes in 2007–2008 helped push an additional 13 million people into poverty in rural Bangladesh. Moreover, we find that the determinants of poverty have not been time‐invariant. In particular, agricultural production, which had previously been associated with a higher incidence of poverty, served as a hedge against higher food prices during 2004–2008.     

Higher fuel and food prices: impacts and responses for Mozambique

Rising world prices for fuel and food represent a negative terms‐of‐trade shock for Mozambique. The impacts of these price rises are analyzed using various approaches. Detailed price data show that the world price increases are being transmitted to domestic prices. Short‐run net benefit ratio analysis indicates that urban households and households in the southern region are more vulnerable to food price increases. Rural households, particularly in the North and Center, often benefit from being in a net seller position. Longer‐term analysis using a computable general equilibrium (CGE) model of Mozambique indicates that the fuel price shock dominates rising food prices from both macroeconomic and poverty perspectives. Again, negative impacts are larger in urban areas. The importance of agricultural production response in general and export response in particular is highlighted. Policy analysis reveals difficult trade‐offs between short‐run mitigation and long‐run growth. Improved agricultural productivity has powerful positive impacts, but remains difficult to achieve and may not address the immediate impacts of higher prices.     

Demand for meat and dairy products by Turkish households: a Bayesian censored system approach

We extend the Tobit (censored) linear equation system procedure to utility‐theoretic demand functions, along with a mapping mechanism to impose the adding‐up restriction implied by consumer utility maximization theory—a theoretical restriction very often ignored in previous empirical studies with censored demand systems. In this context, the Bayesian Markov Chain Monte Carlo (MCMC) procedure is applied to the censored linear approximate almost ideal demand system (LAIDS) for 12 food products, using data from the Turkish Household Expenditure Survey. All own‐price elasticities are negative and expenditure elasticities positive. Uncompensated own‐price elasticities for rural households are generally much higher than those for their urban peers, though demand for most food products are own‐price elastic for both types of households. The differential patterns in demand elasticities between urban and rural households become even more evident (almost twice) as relatively more expensive foodstuffs are consumed, showing that accessibilities to alternative products have made rural Turkish households more cognizant toward price changes in foods. Household characteristics play a key role in food expenditures, notably so in urban areas, and regional and seasonal differences are also present.     

Rising Food Prices and Household Welfare: Evidence from Brazil in 2008

Food price inflation in Brazil in the 12 months to June 2008 was 18%, whereas overall inflation was 7%. Using spatially disaggregated monthly data on consumer prices and two different household surveys, we estimate the welfare consequences of these food price increases, and their distribution across households. Because Brazil is a large food producer, with a predominantly wage‐earning agricultural labour force, our estimates include general equilibrium effects on market and transfer incomes, as well as the standard estimates of changes in consumer surplus. Although the expenditure (or consumer surplus) effects were large, negative and markedly regressive everywhere, estimates of the market‐income effect were positive and progressive, particularly in rural areas. Because of this effect on the rural poor, and of the partial protection afforded by increases in two large social assistance benefits, the overall impact of higher food prices in Brazil was U‐shaped, with middle‐income groups suffering larger proportional losses than the very poor. Nevertheless, as Brazil is 80% urban, higher food prices still led to a greater incidence and depth of poverty at the national level.     

Evaluating price transmission between global agricultural markets and consumer food price indices in the European Union

This paper uses error correction models to evaluate the extent to and speed at which world agricultural commodity price movements affect consumer food prices in the European Union member states. We consider three types of world commodity price indices, each containing different commodities and weighting criteria. Results reveal a long‐run relationship between world agricultural commodity and consumer food prices in over half of the member states. Consumer prices in different member states and categories of member states respond differently to specific world price indices, suggesting that there are disparities in the structure and the efficiency of their food markets. The eurozone founders generally have lower transmission elasticities. This should be taken into account when predicting the impacts of extreme world price volatility and consumer food price rises, prompting governments to pay attention to the most vulnerable households.     

World food prices and poverty in Indonesia

Spikes in international food prices in 2007–2008 worsened poverty incidence in Indonesia, both rural and urban, but only by small amounts. The paper reaches this conclusion using a multisectoral and multihousehold general equilibrium model of the Indonesian economy. The negative effect on poor consumers, operating through their living costs, outweighed the positive effect on poor farmers, operating through their incomes. Indonesia's post‐2004 rice import restrictions shielded its internal rice market from the temporary world price increases, muting the increase in poverty. But it did this only by imposing large and permanent increases in both domestic rice prices and poverty incidence. Poverty incidence increased more among rural than urban people, even though higher agricultural prices mean higher incomes for many of the rural poor. Gains to poor farmers were outweighed by the losses incurred by the large number of rural poor who are net buyers of food, and the fact that food represents a large share of their total budgets, even larger on average than for the urban poor. The main beneficiaries of higher food prices are not the rural poor, but the owners of agricultural land and capital, many of whom are urban based.     

Implications of the global growth slowdown for rural poverty

Over the past 25 years, higher growth in developing countries has contributed to a dramatic fall in global poverty, although poverty rates in rural areas remain higher than in urban areas. Unfortunately, projected growth rates have fallen in recent years; this article examines the impact of this slowdown on the poor, particularly the rural poor. It first uses a global model to assess the impacts of lower productivity on key price and income variables. It then uses microsimulation models for almost 300,000 households to assess the impacts on their real incomes. Although poverty rates overall are projected to fall substantially, the poorest countries see the greatest slowdown in poverty reduction, with over 5% of their population projected to remain below the poverty line. In addition, poverty rates will remain alarmingly high in many countries. Overall, 38 million fewer people will leave extreme poverty compared to earlier projections. Farm households are at particular risk in middle‐income countries, with over 1.5% more of the farming population remaining trapped in poverty than previously estimated. By 2030, average extreme poverty in rural areas is projected at about 7.5%, rather than 7.1% under the earlier growth projections. Clearly, a strong focus on policies for poverty reduction will be vital for eliminating poverty by 2030.     

Estimating food demand in Paraguay from household survey data

We estimate a food demand system in Paraguay based on the 1997 national household survey, considering 12 food categories. To obtain demand elasticity estimates from household survey data accounting for quality effects, measurement errors, and censored observations, price indexes are obtained from ordinary least squares predictions of changes in unitary values caused by spatial and temporal variations, and the two‐step estimation procedure ( Shonkwiler and Yen, 1999 ) is applied. Our approach yields reasonable estimates of combined quantity and quality responses with respect to price. Results suggest distinct consumption behavior in urban and rural areas, particularly for chicken, eggs, dairy, and fats and oils, which are likely because of differences in the food distribution system and availability of nonmarket food sources.     

Markets and pro-poor agricultural growth: insights from livelihood and informal rural economy models in Malawi

This article presents the development of a set of programming models describing the major features of different rural livelihoods and of the informal rural economy they together make up in Malawi. The models allow for differentiated responses by different household types to change and for the partial equilibrium effects of consequent supply, demand, and price adjustments in labor and grain markets. The models provide insights into the relations between own‐farm and nonown‐farm activities in different households' livelihoods and in the informal rural economy as a whole, and are used to investigate possible impacts of increasing cash crop prices and of a more open rural economy. Impacts of these changes on the poor are found to be critically dependent upon supply and demand elasticities in labor and grain markets, but the poor could potentially suffer significant losses from increased openness of the local economy leading to increased expenditure by less poor households on imported goods and services.     

Implications of higher global food prices for poverty in low‐income countries1

In many poor countries, the recent increases in prices of staple foods have raised the real incomes of those selling food, many of whom are relatively poor, while hurting net food consumers, many of whom are also relatively poor. The impacts on poverty will certainly be very diverse, but the average impact on poverty depends upon the balance between these two effects, and can only be determined by looking at real‐world data. Results using household data for 10 observations on nine low‐income countries show that the short‐run impacts of higher staple food prices on poverty differ considerably by commodity and by country, but that poverty increases are much more frequent, and larger, than poverty reductions. The recent large increases in food prices appear likely to raise overall poverty in low‐income countries substantially.     

Crisis Behind Closed Doors: Global Food Crisis and Local Hunger

The high and volatile food prices in 2007–8 triggered estimates of massive increases in poverty and hunger. However, hunger and volatile food prices have long been a feature of developing economies. This paper examines the impact of high global food prices on domestic terms‐of‐trade, food consumption and child undernutrition in the Central African Republic, Ethiopia, Liberia and Sierra Leone, comparing findings with the impacts of ‘seasonality’. As high international food prices permeated domestic markets, households in all the case study areas resorted to coping strategies common in the annual hunger season. Though acute malnutrition has not risen as consistently as in a seasonal hunger crisis, reduced micronutrient intake threatens to have severe long‐term consequences for health and poverty reduction. The similar impacts of seasonal and global food price rises on households provide an opportunity to design appropriate interventions to protect livelihoods.     

Food commodity price changes and consumer welfare in Bangladesh: Valuable lessons for today

The recent rise in global food prices threatens many countries worldwide, especially the vulnerable populations. Viable coping strategies can only be designed based on the important policy lessons learned from the experiences of these countries in confronting the similar shocks of 2007–2011. However, the disproportionate effects of these events and the impacts of policy responses remain largely unexplored. We examine the impact of a food price surge and the effectiveness of various mitigating policies in Bangladesh, one of the most populous, densely populated countries in the world that is plagued by poverty. Specifically, we combine individual-level expenditure survey data with recent advances in consumer theory to examine the welfare consequences across income groups and geographic areas of the country over 2000–2016. Our empirical findings lend support to the hypothesis that the brunt of the price surge was borne by relatively less affluent and rural households, and government poverty alleviation programmes were largely ineffective.     

Food Import Demand in the Czech Republic

This paper provides an overview of Czech food import demand in the transition period of the 1990s. It provides econometric estimates of own‐ and cross‐price elasticities as well as group expenditure elasticities of Czech import demand for sixteen lower level and four upper level food groups. Based on the Hausman test for endogeneity, which supported the hypothesis that Czech import prices were exogenously determined outside of the Czech economy, we estimated five demand models as direct‐demand systems of the AIDS type. The econometric estimation of elasticities used bimonthly data from March 1993 to August 1997.     

Food demand elasticities for Australia

There is renewed interest in robust estimates of food demand elasticities at a disaggregated level not only to analyse the impact of changing food preferences on the agricultural sector, but also to establish the likely impact of pricing incentives on households. Using data drawn from two national Household Expenditure Surveys covering the periods 1998/1999 and 2003/2004, and adopting an Almost Ideal Demand System approach that addresses the zero observations problem, this paper estimates a food demand system for 15 food categories for Australia. The categories cover the standard food items that Australian households demand routinely. Own‐price, cross‐price and expenditure elasticity estimates of the Marshallian and Hicksian types have been derived for all categories. The parameter estimates obtained in this study represent the first integrated set of food demand elasticities based on a highly disaggregated food demand system for Australia, and all accord with economic intuition.     

Changing food consumption patterns in rural and urban Vietnam: Implications for a future food supply system

Rapid income growth and urbanisation could significantly change the composition of the food basket in many emerging economies. This study estimates a demand system, including 15 major food items in Vietnam, with multiyear household survey data. We find a large variation in the estimated price elasticities (–0.05 to –0.88) and expenditure elasticities (–0.16 to 2.56). Food types, urban status and income groups can explain this variation. We also find that the staple food, rice, is already an inferior good for rich urban households in Vietnam. Moreover, food preferences are evolving away from rice but towards animal proteins (fish, pork, chicken, eggs and milk), fruits and vegetables, irrespective of urban status and income groups. As the Vietnam economy continues to grow with a doubling of gross domestic product (GDP) in the next decade, per capita rice consumption in both urban and rural areas and across different income groups will continue to decline, whereas demand for other high‐value products will rise. Thus, government policy should focus on encouraging demand‐oriented food production. In addition, crop diversification at the farm level needs to improve substantially to meet the rising demand for these food products due to income growth and urbanisation.     

Inter‐ and intra‐seasonal crop acreage response to international food prices and implications of volatility

Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. This study makes estimations of monthly (i.e., seasonal) versus annual global acreage response models for the world's principal staple food crops: wheat, corn, soybeans, and rice. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra‐annual acreage elasticity is crucial for expected food supply and for input demand, especially in the light of the recent short‐term volatility in food prices. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short‐run elasticities are about 0.05 to 0.40; price volatility tends to reduce acreage for some of the crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of an essence for acreage response. The analysis indicates that acreage allocation is more sensitive to prices in the northern hemisphere spring than in winter and the response varies across months.     

Toward a green revolution in Africa: what would it achieve,and what would it require?

The current global food crisis has reemphasized the costliness of Africa's failure to achieve food security and poverty reduction. The instrument by which other more successful developing countries achieved these outcomes was a “Green Revolution” in agriculture. While previous research has provided largely discursive appraisals of the viability of an African Green Revolution, this article adopts a more rigorous methodology to address that question. First, an economy‐wide multimarket model, augmented with existing poverty–growth elasticities, is developed to assess the likely impacts of a rapid acceleration in food production (of the kind witnessed in previous Green Revolutions) on food prices, consumption and demand, farmer revenue, and poverty. Our results suggest that a rapid growth in staple production, together with more integrated regional markets, would reduce food prices by roughly 20–40% for consumers and 10–20% for producers among the major crops. This translates into a large rise in farm revenues, annual agricultural growth rates of 6.5% or higher, broader income growth and food security, and over 70 million Africans being lifted out of poverty. The article concludes by emphasizing the kinds of fundamental policy actions and resources that would be required for achieving these outcomes.     

The effects of a large discrete maize price increase on the distribution of household welfare and poverty in rural Kenya1

This study estimates the effects of a large discrete maize price increase on the welfare of a sample of rural Kenyan households. The usual first‐order welfare approximation formula is extended to a second‐order formula that allows for supply and demand responses to the price change. Results show that many rural households are not affected greatly by the price change, and there are about as many gainers as losers. However, these full sample results mask important differences across regions. Welfare gains generally take place in major production areas while losses are in areas where most households are net buyers of maize. Semiparametric methods are used to investigate the relationship between income and the size of the welfare effect, and poverty dominance techniques are applied to study the impacts of the maize price increase on rural poverty.     

Household Food Demand Analysis in India

Price and expenditure elasticities and estimates of the effect of household demographic variables on Indian food items are estimated using a recent household survey data in rural and urban areas. Using a linear approximate almost ideal demand system (LA/AIDS), the results indicate that for commodity groups (milk and milk products; cereals and pulses; edible oils; meat, fish, and eggs; vegetables and fruits; other foods) demand is elastic only for milk and milk products in both rural and urban areas of India. The impact of demographic variables such as region, household size, education level of household head, and seasonality, was generally significant.     

Energy price reform and food markets: the case of bread supply chain in Iran

Reforming energy price is the core of Iranian economic reform plan during 2010–2014. However, increasing price of energy may have adverse effects on the agricultural and food markets. This study was conducted to address these problems in the most important food of Iranian people “bread” by developing a spatial supply chain model. Results show that consumers’ welfare would experience a sharp decrease though the impacts on farmers are trivial. Also, results indicate that the key to success the reform without political backlash in the short‐run is the cash transfer program under which the government redistributes part of the reform's benefits among consumers. Per capita compensation payments would be equal to 51.50 and 46.09 US$ per year for a typical rural and urban person, respectively. Moreover, the results provide more detailed information about the market characteristics and the payments both in nationwide and regional scale as well as in different income groups.