Are we overestimating the negative impact of higher food prices? Evidence from Ghana

Most studies of the welfare impact of higher food prices adopt Deaton's approach, based on the first‐order effect of prices changes using income and expenditure survey data. This paper explores the impact of higher maize and food prices in Ghana and considers the sensitivity of results to changes in several assumptions. If second‐order effects are included, incorporating household response to price changes, the welfare impact of food price increases is more positive, but only modestly so. However, if we assume that marketing margins are constant in real terms rather than proportional to prices, the welfare impact is substantially more positive. These findings highlight the need for more research on the behavior of marketing margins under volatile prices.     

The impact of coffee price changes on rural households in Uganda

Employing household survey data covering the periods 1992–1993, 1995–1996, and 1999–2000, this article shows for the case of Uganda that a coffee market liberalization followed by a price boom was associated with substantial reductions in poverty, which could even be sustained when prices went down again. Coffee is not planted by the richest farmers and the gains from higher coffee prices accrued to poorer and richer coffee farmers alike. Nor were poorer farmers hurt disproportionately when prices fell. In addition, we find strong spillovers from coffee production to other agriculture, which tends to favor the poor, and to nonagricultural activities. These multiplier effects are concentrated in coffee regions. In an economic environment characterized by a booming agricultural sector, coffee farmers were able to accommodate the negative price shock, in particular through agricultural diversification. General agricultural growth also cushioned possible negative multiplier effects in coffee regions. Overall, the case of coffee in Uganda thus lends support to the view that agricultural trade liberalization is beneficial for the poor.     

Peri-urban agriculture in Jabodetabek Metropolitan Area and its relationship with the urban socioeconomic system

Peri-urban agriculture (PUA) has been proposed as an important urban element to deal with the challenges of increasing poverty, food insecurity, and environmental degradation as particularly found in rapidly expanding cities of the developing world. However, farming in the peri-urban is under strong pressure from urbanization. The economic and social roles of farming need to be better understood in order to integrate peri-urban agriculture into urban planning. This study used multivariate techniques and Geographically Weighted Regression to analyze statistical data at a village and sub-district, to explore the varying relationships between agricultural activities and urban economic activities, urban poverty and informality, as well as food security. This method was applied in the Jabodetabek Metropolitan Area (JMA) with Indonesia’s capital Jakarta at its core, and it resulted in some important findings. First, PUA was more associated with the increasing low and middle class residential areas and the growing small-middle scale urban economic activities rather than development of tourism and larger traditional market facilities. Second, whereas PUA in the North of JMA was under pressure by the increasing poverty, in the Southeast of JMA it has expanded concurrently with increasing poverty. Third, PUA is strengthened by increasing informal activities in the peri-urban zone that offer alternative jobs and additional income for the farmers. Fourth, PUA in the surroundings of Jakarta as well as in the East and Northeast of JMA has contributed to increasing food affordability as well as strengthening food security policy. Based on these results, recommendations to maintain the PUA have been formulated to support its role for the peri-urban economy, reduce poverty, manage informality, and increase food security.     

Consistent poverty comparisons and inference

Building upon the cost of basic needs (CBN) approach, an integrated approach to making consumption-based poverty comparisons is presented. This approach contains two principal modifications to the standard CBN approach. The first permits the development of multiple poverty bundles that are utility consistent. The second recognizes that the poverty line itself is a random variable whose variation influences the degree of confidence in poverty measures. We illustrate the empirical importance of these two methodological changes for the case of Mozambique. With utility consistency imposed, estimated poverty rates tend to be systematically higher in rural areas and lower in urban areas. We also find that the true confidence intervals on the poverty estimates—those incorporating poverty line variance—tend to be considerably larger than those that ignore poverty line variance. Finally, we show that these two methodological changes interact. Specifically, we find that imposing utility consistency on poverty bundles tends to tighten confidence intervals, sometimes dramatically, on provincial poverty estimates. We conclude that this revised approach represents an important advance in poverty analysis. The revised approach is straightforward and directly applicable in empirical work.