Resource information
The spike in food prices between 2005
and the first half of 2008 has highlighted the
vulnerabilities of poor consumers to higher prices of
agricultural goods and generated calls for massive policy
action. This paper provides a formal assessment of the
direct and indirect impacts of higher prices on global
poverty using a representative sample of 63 to 93 percent of
the population of the developing world. To assess the direct
effects, the paper uses domestic food consumer price data
between January 2005 and December 2007--when the relative
price of food rose by an average of 5.6 percent --to find
that the implied increase in the extreme poverty headcount
at the global level is 1.7 percentage points, with
significant regional variation. To take the second-order
effects into account, the paper links household survey data
with a global general equilibrium model, finding that a 5.5
percent increase in agricultural prices (due to rising
demand for first-generation biofuels) could raise global
poverty in 2010 by 0.6 percentage points at the extreme
poverty line and 0.9 percentage points at the moderate
poverty line. Poverty increases at the regional level vary
substantially, with nearly all of the increase in extreme
poverty occurring in South Asia and Sub-Saharan Africa.
