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CONSEQUENCES OF THE CRISIS 71


2. Price changes. All three studies assume domestic food price changes for lack of actual data. Thus the results of these studies should be treated as experimental answers to the research question “What would happen to poverty rates if prices increased by x percent?” In one simulation by Ivanic and Martin (2008), the authors do use real international prices, but they assume a common 60 percent transmission rate to domestic prices. In general, however, the three studies simulate real price changes rang- ing from 10 to 30 percent. Whether these guesses are too high or too low is still not clear. So far we have very limited data on how much overall food prices are changing. Also, what data we do have tend to be urban prices (often wholesale prices). Food prices in rural areas will often be very different, and price rises will probably be smaller in rural areas because of higher transaction costs. Recent studies show that African markets in the same country may not be equally well integrated with international markets (Cudjoe, Breisinger, and Diao 2008; Ulimwengu, Workne, and Paulos 2009), which has strong implications for the spatial impacts of the crisis.


3. Behavioral responses. The three studies assume a limited range of be- havioral responses by consumers and producers. All acknowledge this, and Martin and Ivanic’s (2008) study provides a slightly more sophisti- cated model that also incorporates wage effects based on the Stolper– Samuelson matrix relating net factor incomes to changes in the domes- tic prices of trade goods. But there could be other responses, even in the short term. Many households have diversified income sources that are also flexible, and in Africa most rural people have access to land. When food prices are low, households may chiefly allocate their labor to the nonfarm sector and only farm their own land to supplement their disposable income. Rising food prices, however, could result in fairly quick and reasonably sizable shifts back into on-farm production (much of which would not show up in national production data). Likewise, many countries have diversified diets and may be able to switch to locally produced alternatives. This behavior would, of course, induce prices rises in locally produced goods, but overall food inflation may be contained.


4. Net buyers and net sellers. Many of the countries in the study samples of Ivanic and Martin (2008) and Wodon et al. (2008) experience significant increases in poverty. Similar methods applied to individual country studies find equally strong results, including poverty increases in Ghana (Cudjoe, Breisinger, and Diao 2008), Mexico (Valero-Gil and Valero 2008), and Paki- stan (ul Haq, Nazli, and Meilke 2008). Even a net rice exporter like Thai- land appears to experience an increase in national poverty because of


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