Food Price Changes and Household Welfare: What Do We Learn from Two Different Approaches? |
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Authors: | Luca Tiberti Marco Tiberti |
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Institution: | 1. Partnership for Economic Policy (PEP), Université Laval, Québec, Canada;2. The World Bank, Development Data Group, Rome, Italy |
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Abstract: | The use of a marginal approach can significantly distort the predicted effects of large price variations on monetary welfare over the medium- to longer-term. This paper aims at shedding some light on the differences between a marginal approach and a non-separable agricultural household model with behavioural responses. When behavioural adjustments are allowed, households can adapt their consumption and production patterns by resulting in lower deteriorations in household welfare. The second-order effects introduced in the approach with responses reduce the negative effects due to the first-order consumption effects, with significant differences across quintiles. On average, the second-order effects represent up to roughly 40 per cent of total first-order effects. |
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