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70 CHAPTER 3


Future research would do well to explore this question further, especially what appears to be the somewhat puzzling rise in food prices in Africa, even in several landlocked countries typically thought to be shielded from interna- tional price movements.


Microeconomic Simulations of the Effects of Rising Food Prices on Poverty


This section reviews three papers that provide cross-country simulations of the impacts of rising prices on household poverty: Ivanic and Martin’s (2008) study of 9 countries across several continents; the study by Wodon et al. (2008) of 12 West African countries; and the study by Dessus, Herrera, and Hoyos (2008) of the urban sector of 73 developing countries.5 These papers have been selected because they cover a range of countries and use quite similar methodologies despite their different sample sizes and scopes. The basic approach in these papers follows Deaton (1989) in estimating


the change in food welfare (∆WFood) as the product of the food net-benefit ratio (NBRFood) and the change in food prices (∆PFood): ∆WFood = ∆PFood × NBRFood = ∆PFood × (YFood/YTotal – CFood/CTotal),


where YFood/YTotal is the ratio of food sales and own-production to total house- hold monetary income, and CFood/CTotal is the ratio of food expenditure and own-consumption to total household expenditure. Notice that, by definition,


own-production equals own-consumption, and because each enters into YFood/ YTotal and CFood/CTotal, respectively, the consumption of food produced by the household is netted out of NBRFood. Hence the main issues with microeconomic assessments of the poverty impacts concern the size of price changes, the


numbers of net buyers and sellers, and the choice of poverty line. The most important point to note about these papers is that none of them assesses the most likely impact on poverty for the following reasons: 1. Data sources. All three studies simulate results from admittedly quite recent macroeconomic surveys, although this problem is not serious, as the key parameters derived from these surveys will not have changed sig- nificantly in recent years.


5 See also the study by Zezza et al. (2008) of the welfare impacts of 13 LDCs. That study is omitted from the present discussion because it does not calculate the effects of rising prices on poverty headcounts. ADB (2008) also makes estimates, but for only two countries. The Economic Commission for Latin America and the Inter-American Development Bank are also reported to have made estimates, but these were not publicly available, and they appeared to have used different and rather simplistic methods (see Lustig 2008).


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