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

41 Pages Posted: 20 Apr 2016

See all articles by Daniel Lederman

Daniel Lederman

World Bank - Latin America and Caribbean Region

Guido G. Porto

World Bank; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2014

Abstract

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.

Keywords: Markets and Market Access, Economic Theory & Research, Emerging Markets, Labor Policies, Access to Markets

Suggested Citation

Lederman, Daniel and Porto, Guido, The Price is Not Always Right: On the Impacts of (Commodity) Prices on Households (and Countries) (May 1, 2014). World Bank Policy Research Working Paper No. 6858, Available at SSRN: https://ssrn.com/abstract=2433811

Daniel Lederman (Contact Author)

World Bank - Latin America and Caribbean Region ( email )

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Guido Porto

World Bank ( email )

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HOME PAGE: http://econ.worldbank.org/staff/gporto

National Bureau of Economic Research (NBER)

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