Agricultural Development Economics


Impact of increasing prices of agricultural commodities on poverty
Panagiotis Karfakis, Jackeline Velazco, Esteban Moreno, Katia Covarrubias
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The present paper attempts to identify the groups of households that most likely will face positive or negative welfare consequences as a result of food price increases. Using data from household surveys and differentiating urban from rural areas as well as food buyers from food sellers, the analysis presents preliminary evidence, showing that when the short run effects on consumption are considered, household welfare is expected to decrease, threatening initially food security. Real benefits are expected to occur for selected household groups, as soon as some second round effects, that transform the production structure, are considered. Market participation is critical for small land holders to capitalize potential benefits. Irregular wage earners may also gain from the price increases as long as expansion of the food producing sectors takes place in the parts of the developing countries that agriculture is the dominant source of income. Nevertheless it cannot be neglected that appropriation of the benefits, requires sufficient transmission of the price increases to the farm gate. On the other hand, and unless substantive action is taken, urban poverty is expected to increase given that almost uniformly, populations in such areas are net buyers of food.
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