Food Price Spikes, Price Insulation, and Poverty

47 Pages Posted: 17 Jul 2013

See all articles by Kym Anderson

Kym Anderson

University of Adelaide - Centre for International Economic Studies (CIES); Centre for Economic Policy Research (CEPR); Australian National University

Maros Ivanic

World Bank; World Bank - Development Economics Group (DEC); World Bank - Development Research Group (DECRG)

Will J. Martin

International Food Policy Research Institute (IFPRI)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2013

Abstract

This paper has two purposes. It first considers the impact on world food prices of the changes in restrictions on trade in staple foods during the 2008 world food price crisis. Those changes -- reductions in import protection or increases in export restraints -- were meant to partially insulate domestic markets from the spike in international prices. We find that this insulation added substantially to the spike in international prices for rice, wheat, maize and oilseeds. As a result, while domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than in the absence of such insulation. The paper’s second purpose it to estimate the combined impact of such insulating behavior on poverty in various developing countries and globally. We find that the actual poverty-reducing impact of insulation is much less than its apparent impact, and that its net effect was to increase global poverty in 2008 by 8 million, although this increase was not significantly different from zero. Since there are domestic policy instruments such as conditional cash transfers that could now provide social protection for the poor far more efficiently and equitably than variations in border restrictions, we suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike.

Keywords: Commodity price stabilization, Domestic market insulation, International price transmission, Loss aversion

JEL Classification: F14, O24, Q17, Q18

Suggested Citation

Anderson, Kym and Ivanic, Maros and Martin, William J., Food Price Spikes, Price Insulation, and Poverty (July 2013). CEPR Discussion Paper No. DP9555, Available at SSRN: https://ssrn.com/abstract=2294814

Kym Anderson (Contact Author)

University of Adelaide - Centre for International Economic Studies (CIES) ( email )

School of Economics
Adelaide SA 5005
Australia
+61 8 8313 4712 (Phone)
+61 8 8223 1460 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University ( email )

Arndt-Corden Dept of Economics
Coombs Building
Canberra, AK ACT 2600
Australia
+61 8 8313 4712 (Phone)

HOME PAGE: http://publicpolicy.anu.edu.au/crawford_people/content/staff/acde/kanderson.php

Maros Ivanic

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

World Bank - Development Economics Group (DEC) ( email )

1818 H Street N.W.
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

William J. Martin

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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