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AGRICULTURE, TRADE, AND POVERTY IN EGYPT 93


Table 4.19 Estimated effects of increased commodities prices on poverty in Egypt


Urban Short- Long- Simulation Base


40% increase in wheat price 36 40% increase in rice price


40% increase in fruit and vegetable price


40% increase in sugar price


40% increase in prices of wheat, rice, cotton, fruits and vegetables, and sugar


36 40% increase in cotton price 36


36 36


37 36


37 36


35 37 36


37 36


41 41 41


Poverty rate (%) Rural


Short- Long-


43 41 40


40 41 40


38 38 38


National


term term Base term term Base term 37


39 39 38


41 41


42 40


42 40


38 38


39 38


Short- Long- term


37 39 38


39 38


36


38 n.c. 41


42 n.c. 38


40 n.c.


Source: Simulation results based on data from the 1997–98 Egypt Integrated Household Survey. Note: The long-term effect of increasing all five prices is not calculated (n.c.) because of un- certainty regarding the cross-price elasticities of supply.


run given that 89 percent of the households are net buyers, but three factors help explain this result: (1) net sellers are poorer than net buyers, (2) the gains to the average net seller will be larger than the losses to the average net buyer, and (3) some net buyers will become net sellers in response to the higher wheat prices.


The effect of rice price increases on the poverty rate in Egypt will be quite small. A 40 percent increase in rice prices will raise the urban poverty rate by 1 percentage point. It will have this effect because urban rice consumers will be adversely affected by the higher price, but the effect will be small because rice represents just 2.4 percent of the budgets of urban households. Rice farmers will gain, but not by enough to noticeably affect the rural pov- erty rate. This is because, as discussed earlier, rice farmers account for just 11 percent of the rural population. The negative effect on urban households will be sufficiently large to raise the national poverty rate by 1 percentage point.


A 40 percent increase in cotton prices will reduce the rural poverty rate by 1 percentage point but will have no noticeable effect on the urban or national poverty rate. Again, the small effect is explained by the fact that cotton growers represent only 4.2 percent of all households nationally. A 40 percent increase in fruit and vegetable prices will cause the urban poverty rate to rise 1 percentage point (recall that fruits and vegetables


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