UC Davis Agricultural and Resource Economics

Joseph Balagtas, Purdue University

Did the commodity price spike increase rural poverty? Evidence from a long-run panel in Bangladesh

Date and Location

Wednesday, May 15, 2013, 12:10 PM - 1:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

We assess the effects of the dramatic rise in agricultural commodity prices during 2007-2008 on income dynamics and poverty among rural households in Bangladesh. A unique panel data set allows us to put the effects of recent events in the context of long-run trends in income and poverty. We use data from a nationally representative longitudinal survey of rural households in Bangladesh collected in four waves in 1988, 2000, 2004, and 2008. Nargis and Hossain (2006) analysed income dynamics and poverty incidence for the first three waves, finding a declining trend in both the incidence and severity of poverty, aided in particular by human capital development and off-farm employment opportunities. We update and extend the analysis to include data collected in 2008, at the height of a spike in agricultural prices. We find that the price of a balanced food basket increased by more than 50 percent during 2000-2008, while household income rose only 15 percent. As a result the incidence and severity of rural poverty in Bangladesh sunk to pre-2000 levels during 2004-2008. Thus the price spikes in 2007-2008 helped push an additional 13 million people into poverty in rural Bangladesh. Moreover, we find that the determinants of poverty have not been time-invariant. In particular, agricultural production, which had previously been associated with a higher incidence of poverty, served as a hedge against higher food prices during 2004-2008.

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