The Impact of Food Inflation on Urban Poverty and its Monetary Cost: Some Back-of-the-Envelope Calculations

23 Pages Posted: 20 Apr 2016

See all articles by Sebastien Dessus

Sebastien Dessus

World Bank - West Bank and Gaza Resident Mission

Santiago Herrera

World Bank

Rafael E. De Hoyos Navarro

World Bank

Date Written: July 1, 2008

Abstract

This paper uses a sample of 73 developing countries to estimate the change in the cost of alleviating urban poverty brought about by the recent increase in food prices. This cost is approximated by the change in the poverty deficit, that is, the variation in financial resources required to eliminate poverty under perfect targeting. The results show that, for most countries, the cost represents less than 0.1 percent of gross domestic product. However, in the most severely affected, it may exceed 3 percent. In all countries, the change in the poverty deficit is mostly due to the negative real income effect of those households that were poor before the price shock, while the cost attributable to new households falling into poverty is negligible. Thus, in countries where transfer mechanisms with effective targeting already exist, the most cost-effective strategy would be to scale up such programs rather than designing tools to identify the new poor.

Keywords: Rural Poverty Reduction, Population Policies, Food & Beverage Industry, Debt Markets

Suggested Citation

Dessus, Sebastien and Herrera, Santiago and De Hoyos, Rafael E., The Impact of Food Inflation on Urban Poverty and its Monetary Cost: Some Back-of-the-Envelope Calculations (July 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1233042

Sebastien Dessus (Contact Author)

World Bank - West Bank and Gaza Resident Mission ( email )

P.O. BOX 54842
Jerusalem
Israel
+972 2 236 65 49 (Phone)
+972 2 236 65 43 (Fax)

Santiago Herrera

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Rafael E. De Hoyos

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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