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

50 Pages Posted: 20 Apr 2016

See all articles by Daniel Lederman

Daniel Lederman

World Bank - Latin America and Caribbean Region

Guido G. Porto

Universidad Nacional de La Plata - Faculty of Economics

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Date Written: February 29, 2016

Abstract

This paper provides an overview of the impact that one-time changes in commodity and other prices have 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 uncovers strong commodity dependence on both continents: households typically allocate a large fraction of their budget to commodities, and they often also depend on commodities to earn their income. This income and expenditure dependency suggests sizable impacts and adjustments following commodity price shocks. The article explores these effects with a review of the relevant literature. The authors study consumption and income responses, labor market responses, and spillovers across sectors. The paper provides evidence on the relative magnitudes of various mechanisms through which commodity prices affect household (and national) welfare in developing economies.

Keywords: Labor Markets, Rural Labor Markets, Commodity Risk Management

Suggested Citation

Lederman, Daniel and Porto, Guido G., The Price is Not Always Right: On the Impacts of Commodity Prices on Households (and Countries) (February 29, 2016). World Bank Policy Research Working Paper No. 7583, Available at SSRN: https://ssrn.com/abstract=2740117

Daniel Lederman (Contact Author)

World Bank - Latin America and Caribbean Region ( email )

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Washington, DC 20433
United States

HOME PAGE: http://sites.google.com/site/danielledermanworldbank/

Guido G. Porto

Universidad Nacional de La Plata - Faculty of Economics ( email )

1900 La Plata
Argentina

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