Environmental Valuation & Cost-Benefit News

Link: http://wbro.oxfordjournals.org/cgi/content/abstract/25/1/157?etoc

Abstract: The spike in global food prices in 2008 led to significantly higher food prices across the developing world. Global commodity prices have since fallen but remain volatile, and local food prices remain high in many countries. The authors review the evidence on the potential impact of higher food prices on poverty, focusing on Sub-Saharan Africa, and examine the extent to which policy responses are able to protect the poor. They show that rising food prices are likely to lead to higher poverty in Sub-Saharan Africa as the negative impact on net consumers outweighs the benefits to producers. A recent survey shows that the most common policy response in Sub-Saharan African countries in 2008 was reducing taxes on food, while outside the region subsidies were the most popular measure. Sub-Saharan African countries also have a higher prevalence of food-based safety net programs, some of which were scaled up to respond to rising prices. The review suggests that the benefits from reducing import tariffs on staples are likely to accrue largely to the nonpoor. Safety net programs can be more effective, but geographic targeting and other investments to strengthen safety nets are necessary to ensure that fewer people are affected by future crises.

With a 50% increase in prices the average increase in the poverty headcount is 4.4 percentage points when only the impact on the consumer side is taken into account. This falls to 2.5 percentage points when the positive impact on producer incomes is accounted for. ... The differences are smallest for Niger, Liberia, and Gabon. These are three countries with substantial net imports of food. In addition, in Liberia and Niger, while local food production is important, much of this local production is auto-consumed, and thereby is not taken into account either in the upper or in the lower bound poverty estimates. In urban areas, the average upper bound impact across all countries is 5.2 percentage points, and this falls to 3.7 points with producer gains. This drop may appear to be large, but many urban households are net producers of food, especially outside of the capital cities. In rural areas, the average upper bound impact is 4.1 points, falling to 2.2 points when factoring in producer gains. These impacts are large. For example, an average 3.5 percentage point impact at the national level for all of sub- Saharan Africa, which has a total population of more than 800 million, would imply that the food crisis could lead to an increase in poverty of close to 30 million persons. In addition, all households who are already in poverty would be even poorer.

by Quentin Wodon and Hassan Zaman
The World Bank Research Observer via Oxford Journals http://wbro.oxfordjournals.org
Volume 25, Issue 1; 2010; Pages 157-176
doi:10.1093/wbro/lkp018

Full free text is available at http://go.worldbank.org/RWHVNUCMA0