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GTAP Resource #3267

"Impacts of increasing oil prices on poverty and hunger"
by Lucas, Paul, Johannes Bollen and Ton Manders


Abstract
In this paper we develop a tool to assess the impacts of increasing oil and gas prices on poverty and hunger. We have linked a recursive dynamic general equilibrium model with a system dynamic modeling framework developed to address long-term human development in relation to socio-economic and environmental changes.
The modeling framework is used to assess the impacts of an exogenous price shock for oil and gas prices on the macro-economy, poverty and hunger.
High energy prices entail the largest GDP losses in energy exporting countries although these losses may be partly or completely be offset with respect to expenditures by high terms-of-trade gains. However, sectoral reallocation of capital inputs from energy-intensive sectors may compensate part of the GDP losses and even increase the production in energy-extensive sectors, including the agriculture sector. In countries with high oil intensity and a high export dependence on oil, this effect might be hampered, resulting in an overall capital flee. Energy importing countries are confronted with lower GDP losses, but gain much less from capital reallocation and are confronted with terms-of-trade losses.
Impacts on poverty are relatively high compared to the changes in income and expenditures. Oil and gas exporting countries can decrease their poverty numbers when expenditures increase, while oil and gas importing countries see their poverty increase. The impacts on hunger rely on changes in food availability. Most energy exporting countries see their food availability increase. Oil and gas importing countries see their overall availability drop. Agriculture in India and Central Asia is relatively energy intensive and might therefore suffer from higher energy prices.
The applied methodology has several shortcomings, mainly with respect to the way inequality is addressed and the representation of agriculture sectors in the CGE model. Therefore, results should be interpreted with care.


Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Not published
By/In:
Date: 2010
Version:
Created: Manders, T. (4/14/2010)
Updated: Batta, G. (5/17/2010)
Visits: 2,218
- Economic analysis of poverty


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