World Food Prices and Human Development: Policy Simulations for Archetype Low-Income Countries

In recent years, world food prices have increased and fluctuated widely. This paper explores the impact of international food prices and domestic policies on Millennium Development Goal (MDG) and macro indicators for two archetype low-income countries, a net food exporter and a net food importer, using Maquette for MDG Simulations (MAMS), a Computable General Equilibrium model. The simulations, which cover the period 2011-2025, indicate that the size of positive (negative) effects on macro and MDG indicators of a food export (import) price increase depend on the initial gross domestic product share for food exports (imports), leaving countries that are heavily involved in international food trade more exposed to international shocks. Given relatively low elasticity estimates, the impact of changes in food prices on undernourishment are relatively marginal. Flexible responses (in terms of production shares, whether output is exported or sold at home, and whether domestic demanders buy imports or domestic output) enable countries to benefit from or be less hurt by price changes. The case for policy responses to higher import prices is stronger for the net food importer. An untargeted food subsidy, financed by taxes or spending cuts, reduces undernourishment at the cost of a slight deterioration for most other indicators. By contrast, aid-financed food subsidies neutralize the negative impact of higher import prices whereas financing via domestic borrowing is counterproductive, leading to a deterioration across all indicators. If administered at moderate costs, tax-financed targeted transfers more effectively reduce headcount poverty and inequality with macroeconomic repercussions similar to those of tax-financed subsidies.

Bibliographic Details

Main Author:	Lofgren, Hans
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	World Bank, Washington, DC 2012-04
Subjects:	ACCOUNTING, ACCUMULATION OF CAPITAL, AGRICULTURAL ACTIVITIES, AGRICULTURAL SERVICES, AGRICULTURE, ANNUAL GROWTH, BALANCE OF PAYMENTS, BALANCE OF PAYMENTS DEFICIT, BANK POLICY, BASE YEAR, BENCHMARK, BUDGET CONSTRAINT, BUDGET CONSTRAINTS, CAPITAL ACCUMULATION, CAPITAL STOCK, CAPITAL STOCKS, CHECKS, CHILD LABOR, COMMODITIES, COMMODITY, COMMODITY MARKETS, COMPARATIVE ANALYSIS, CONSUMERS, CONSUMPTION BASKETS, CONSUMPTION DECISIONS, CONSUMPTION GROWTH, CONSUMPTION SMOOTHING, CROSS-COUNTRY STUDIES, CURRENT ACCOUNT, DATA AVAILABILITY, DEBT, DEBT STOCK, DEBT STOCKS, DEMAND CURVES, DEMAND FOR FOOD, DEPRECIATION, DEPRECIATION RATE, DEPRECIATION RATES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMY, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICIES, DEVELOPMENT POLICY, DOMESTIC BORROWING, DOMESTIC DEBTS, DOMESTIC DEMAND, DOMESTIC MARKET, DOMESTIC MARKETS, DOMESTIC PRICE, DOMESTIC PRICE LEVELS, DOWNWARD PRESSURE, ECONOMETRIC ANALYSIS, ECONOMETRIC EVIDENCE, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC SYSTEMS, ELASTICITY, ENVIRONMENTAL IMPACT, EXCHANGE RATE, EXISTING GOVERNMENT, EXPENDITURE, EXPORT GROWTH, EXPORT SHARE, EXPORTER, EXPORTERS, EXPORTS, FACTOR DEMAND, FACTOR MARKET, FACTOR MARKETS, FACTORS OF PRODUCTION, FIXED INVESTMENT, FIXED SHARE, FIXED SHARES, FOOD CONSUMPTION, FOOD DEMAND, FOOD EXPORT, FOOD EXPORTS, FOOD IMPORTS, FOOD INDUSTRY, FOOD OUTPUT, FOOD PRICE, FOOD PRICES, FOOD PRODUCTION, FOOD PRODUCTS, FOOD SUBSIDIES, FOOD SUBSIDY, FOOD SUPPLY, FOREIGN CURRENCY, FOREIGN DEBT, FOREIGN DEBTS, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN EXCHANGE RATE, FOREIGN GOVERNMENT, FOREIGN INTEREST, FULL EMPLOYMENT, FUNCTIONAL FORMS, GDP, GDP PER CAPITA, GENERAL EQUILIBRIUM, GENERAL EQUILIBRIUM MODEL, GINI COEFFICIENT, GLOBAL ECONOMICS, GLOBAL ECONOMY, GOVERNMENT ACTIONS, GOVERNMENT BORROWING, GOVERNMENT BUDGET, GOVERNMENT DEBT, GOVERNMENT FINANCING, GOVERNMENT INVESTMENT, GOVERNMENT SPENDING, GROSS DOMESTIC PRODUCT, GROWTH RATE, GROWTH RATES, HOUSEHOLD SAVINGS, HUMAN DEVELOPMENT, IMPORT, IMPORT GROWTH, IMPORT PRICE, IMPORT PRICES, IMPORT TARIFFS, INCOME, INCOME ELASTICITIES, INCOMES, INTEREST PAYMENTS, INTERNAL RATES OF RETURN, INTERNATIONAL BANK, INTERNATIONAL MARKET, INTERNATIONAL PRICE, INTERNATIONAL PRICES, INTERNATIONAL TRADE, INVESTMENT FINANCING, INVESTMENT LEVELS, INVESTMENT RATES, LABOR FORCE, LABOR MARKET, LIVING STANDARDS, LOCAL CURRENCY, LOW-INCOME COUNTRIES, LOW-INCOME COUNTRY, MARKET CONDITIONS, MARKET PRICES, OUTPUTS, PAYMENT FLOWS, PETROLEUM PRODUCT, POLICY RESPONSE, POLICY RESPONSES, POPULATION GROWTH, POSITIVE EFFECTS, POVERTY ALLEVIATION, PRICE CHANGE, PRICE CHANGES, PRICE INCREASE, PRICE INCREASES, PRICE INDICES, PRICE LEVELS, PRICE OF EXPORTS, PRICE SUBSIDY, PRIVATE CAPITAL, PRIVATE CAPITAL STOCKS, PRIVATE CONSUMPTION, PRIVATE INVESTMENT, PRIVATE SAVINGS, PRODUCTION INCREASES, PRODUCTION STRUCTURE, PROFIT MAXIMIZATION, PROFIT RATE, PUBLIC INVESTMENT, RAPID GROWTH, REAL CONSUMPTION, REAL EXCHANGE RATE, REAL EXCHANGE RATE APPRECIATION, RELATIVE PRICE, RELATIVE PRICES, REMITTANCES, RETURNS, SANITATION SERVICES, SAVINGS, SAVINGS RATES, SMALL COUNTRY, STOCK CHANGE, SUBSIDY POLICY, SUPPLY CURVE, SUPPLY CURVES, SUPPLY SIDE, SURPLUS, TAX, TAX INCREASE, TAX INCREASES, TAX RATE, TAX RATES, TOTAL EXPORT, TOTAL EXPORTS, TOTAL FACTOR PRODUCTIVITY, TRADE BALANCE, TRADE DEFICIT, TRADE LOSS, TRADE POLICY, TRADE SHARES, TRADE SHOCK, TRADE STATISTICS, TRANSACTIONS COSTS, TRANSFER PAYMENTS, TRUST FUND, UNEMPLOYMENT, UNEMPLOYMENT RATE, UNEMPLOYMENT RATES, VALUE ADDED, WAGE GROWTH, WAGES, WORLD DEVELOPMENT INDICATORS, WORLD MARKETS, WORLD PRICE, WORLD PRICES,
Online Access:	http://documents.worldbank.org/curated/en/2012/04/16219124/world-food-prices-human-development-policy-simulations-archetype-low-income-countries http://hdl.handle.net/10986/6035
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