Who Wins and Who Loses from Staple Food Price Spikes? Welfare Implications for Mozambique

43 Pages Posted: 15 Oct 2018 Last revised: 16 Oct 2018

See all articles by Javier Eduardo Baez

Javier Eduardo Baez

World Bank; IZA Institute of Labor Economics

German Daniel Caruso

World Bank

Hemant Pullabhotla

University of Illinois at Urbana-Champaign

Date Written: October 12, 2018

Abstract

With a large share of the population dependent on agriculture and high exposure to natural disasters and other food price shocks, the welfare impacts of food price inflation in Mozambique cannot be ignored. This paper performs incidence analysis exploiting the spatial location of households to match data on consumption with production from agricultural activities to simulate the welfare effects of food price changes. The analysis focuses on maize, rice, and cassava, which form a substantial part of the Mozambican diet, as a source of calories and budgetary allocation. The results show large net negative welfare effects of food price rises in rural areas and small, negative effects in urban areas. A 10 percent increase in maize prices is associated with a reduction of 1.2 percent in consumption per capita in rural areas and 0.2 percent in urban areas. The effects from changes in the prices of rice and cassava are lower but qualitatively equal. Overall, the negative effects are larger for the bottom half of the distribution and imply that the price spike in 2016?17 may have translated into a poverty increase of 4-6 percentage points, with some of the poorest provinces bearing much of the brunt. The results hold to changes in some of the underlying assumptions of the simulations.

Keywords: Inequality, Crops and Crop Management Systems, Climate Change and Agriculture, Food Security, Inflation, Nutrition

Suggested Citation

Baez, Javier Eduardo and Caruso, German Daniel and Pullabhotla, Hemant, Who Wins and Who Loses from Staple Food Price Spikes? Welfare Implications for Mozambique (October 12, 2018). World Bank Policy Research Working Paper No. 8612, Available at SSRN: https://ssrn.com/abstract=3265574

Javier Eduardo Baez (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

German Daniel Caruso

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Hemant Pullabhotla

University of Illinois at Urbana-Champaign ( email )

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