Collateral damage? Welfare effects of the Ukraine war on Pakistan

Muhammad Ayaz (), Charlotte Fontan-Sers, Helene Maisonnave and Mazhar Mughal
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Muhammad Ayaz: TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique, University of Balochistan
Charlotte Fontan-Sers: Centre de recherche de l'ESC Pau - ESC PAU - Ecole Supérieure de Commerce, Pau Business School
Helene Maisonnave: ULH - Université Le Havre Normandie - NU - Normandie Université

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Abstract: The 2022 Ukraine conflict has contributed to a major spike in international commodity prices. In this study, we conduct a top-down, macro-micro simulation analysis by combining Computable General Equilibrium simulations with data from the 2018-19 Pakistan Household Integrated Economic Survey to analyze the impact of global price shock to four major commodities, namely wheat, vegetable oil, petroleum, and fertilizers. We come up with evidence for a significant, non-negligible negative impact of the price shock, both at the aggregate and the household level: Real GDP shrinks and real household consumption and income decrease. The drop in consumption and income is more visible among farm households, with the two falling by 5% and 3.48% respectively. The consumption and income of the above-median income households fall more steeply, and income inequality decreases. The USD3.2 headcount poverty rate at the 2018 purchasing power parity increases by 1.15%. Urban households show the worst decline in food security, both in incidence and intensity. The role of petrol prices in driving poverty among rural farm households and that of food stuff (wheat and vegetable oil prices) in aggravating urban food security is particularly evident. These findings highlight the poverty and food security-worsening dimension of the Russo-Ukrainian conflict.

Keywords: Welfare; Poverty; Food security; Macro-micro models; Ukraine war; Pakistan (search for similar items in EconPapers)
Date: 2023-12
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Published in World Development Sustainability, 2023, 3, ⟨10.1016/j.wds.2023.100082⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05205510

DOI: 10.1016/j.wds.2023.100082

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