The Price is Not Always Right : On the Impacts of (Commodity) Prices on Households (and Countries)

This paper provides an overview of the impact of once-and-for-all changes in commodity prices and other prices on household welfare. It begins with a collection of stylized facts related to commodities based on household survey data from Latin America and Africa. The data uncover strong commodity dependence in both continents: households typically allocate a large fraction of their budget to commodities and they often depend on commodities to earn their income. This income and expenditure dependency suggests sizable impacts and adjustments following commodity-price shocks. The paper explores these effects with a review of the literature. It studies consumption and income responses, labor-market responses, and spillovers across sectors. It ends up providing evidence on the relative magnitudes of various mechanisms through which commodity prices affect household (and national) welfare in developing economies.

Bibliographic Details

Main Authors:	Porto, Guido, Lederman, Daniel
Language:	English en_US
Published:	World Bank, Washington, DC 2014-05
Subjects:	ADVERSE EFFECTS, AGGREGATE SUPPLY, AGRICULTURAL PRICES, AGRICULTURE, ARBITRAGE, BARRIER, COMMERCIAL FARMING, COMMODITIES, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, COMPARATIVE ANALYSIS, COMPETITIVE MARKETS, CONSTANT MARGINAL COSTS, CONSUMER GOODS, CONSUMER PRICES, CONSUMERS, CORN PRICES, CUSTOMS UNION, DEMAND ANALYSIS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISTRIBUTION OF INCOME, DOMESTIC ECONOMY, DOMESTIC MARKETS, DOMESTIC PRICE, DOMESTIC PRICES, ECONOMETRICS, ECONOMIC CONDITIONS, ECONOMIC CRISIS, ECONOMIC DEVELOPMENT, ECONOMIC REFORM, ECONOMICS, ELASTICITY, EMPLOYMENT, ENERGY PRICES, EQUILIBRIUM PRICES, EQUILIBRIUM WAGES, EXCHANGE RATE, EXCHANGE RATES, EXPENDITURE, EXPENDITURES, EXPORT BARRIERS, EXPORT SECTOR, EXPORTS, FACTOR PRICES, FACTORS OF PRODUCTION, FINANCIAL CRISES, FINANCIAL CRISIS, FOOD PRICE, FOOD PRICES, GDP, GENERAL EQUILIBRIUM, GLOBAL MARKET, GLOBAL MARKETS, GLOBALIZATION, IMPERFECT COMPETITION, INCOME, INCOME EFFECT, INCOME EFFECTS, INCOMES, INEFFICIENCY, INFANT MORTALITY, INSURANCE, INTERMEDIATE GOODS, INTERNATIONAL MARKETS, INTERNATIONAL TRADE, LABOR DEMAND, LABOR FORCE, LABOR MARKET, LABOR MARKETS, LABOR REGULATIONS, LABOR SUPPLY, LIVING STANDARDS, LOCAL CURRENCY, LOW-INCOME COUNTRIES, MARKET EFFICIENCY, MARKET EQUILIBRIUM, MARKET FAILURES, MARKET FLUCTUATIONS, MARKET INTEGRATION, MARKET LIBERALIZATION, MARKET POWER, MARKET REFORMS, MARKET STRUCTURE, MARKET VALUE, MARKET WAGE, MARKETING, MARKETING BOARD, MIDDLE-INCOME ECONOMIES, NATIONAL ECONOMY, NATIONAL INCOME, NATURAL RESOURCE, OPEN ECONOMY, OPPORTUNITY COST, OUTPUT, OUTPUTS, POVERTY ALLEVIATION, PRICE CHANGE, PRICE CHANGES, PRICE DECLINES, PRICE EFFECT, PRICE ELASTICITY, PRICE FLUCTUATIONS, PRICE INCREASE, PRICE INCREASES, PRICE INDEX, PRICE INDICES, PRICE INFLATION, PRICE VARIATIONS, PRICE VOLATILITY, PRICING POLICIES, PRODUCT MARKETS, PRODUCTIVE ASSETS, PRODUCTIVITY, PURCHASING, PURCHASING POWER, RATE OF RETURN, REAL WAGES, REGIONAL TRADE, RETAIL, RISK PREMIUM, RURAL LABOR, SALE, SALES, SAVINGS, SHADOW PRICE, SKILLED LABOR, SKILLED WORKERS, SOCIAL PROTECTION, SUBSTITUTE, SUBSTITUTION, SUNK COSTS, TAX, THIRD WORLD, TRADE LIBERALIZATION, TRADE POLICIES, TRADE POLICY, TRADE REFORMS, TRANSACTION COSTS, TRANSACTIONS COSTS, UNSKILLED WORKERS, UTILITY FUNCTION, UTILITY MAXIMIZATION, VOLATILITY, WAGE DETERMINATION, WAGES, WEALTH, WORKING CAPITAL,
Online Access:	http://documents.worldbank.org/curated/en/2014/05/19457803/price-not-always-right-impacts-commodity-prices-households-countries https://hdl.handle.net/10986/18344
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