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GTAP Resource #4215

"Food Price Spikes, Price Insulation and Poverty"
by Anderson, Kym, Maros Ivanic and Will Martin

The analysis in this paper first considers the impact on world food prices of the changes in protection for staple foods during the 2008 world food price crisis—changes that were generally designed to partially insulate domestic markets from changes in international prices.
We find that this insulation substantially increased world prices for key food crops such as rice, wheat, maize and oilseeds. We know that price insulation by all countries is the same-- in terms of impacts on world prices-- as no insulation. However, countries insulate to different degrees, so that domestic prices might be lowered in some countries if they insulate their markets by more than the average degree of insulation. If price insulation is used as a convenient way of reducing price volatility in countries where consumers are not vulnerable to higher prices, the combined effect of this intervention my be to increase global poverty. By contrast, if countries where consumers are particularly vulnerable to higher food prices choose to insulate, then this policy might reduce global poverty. We find that the net effect was to reduce domestic prices in only a few developing countries, while domestic prices in many other countries were increased despite their attempts to insulate against the price rises. We estimate that the overall reduction in import protection or increase in export restraints in developing countries reduced the extent to which global poverty would otherwise have risen. However, the actual poverty-reducing impact of insulation is much less than its apparent impact, and there are now domestic policy instruments that almost certainly could reduce the impact of higher food prices on the poor more efficiently than variations in trade restrictions.

Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Created: Martin, W. (4/15/2013)
Updated: Martin, W. (4/15/2013)
Visits: 1,954
- Economic analysis of poverty
- Agricultural policies
- Food prices and food security

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