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The Effects of Rising Food and Fuel Costs on Poverty in Pakistan

Theresa Chaudhry () and Azam Chaudhry

Lahore Journal of Economics, 2008, vol. 13, issue Special Edition, 117-138

Abstract: The dramatic increase in international food and fuel prices in recent times is a crucial issue fordeveloping countries and the most vulnerable to these price shocks are the poorest segments of society. In countries like Pakistan, the discussion has focused onthe impact of substantially higher food and fuel prices on poverty. This paper used PSLM and MICS household level data to analyze the impact of higher food and energy prices on the poverty head count and the poverty gap ratio in Pakistan. Simulated food and energy price shocks present some important results: First, the impact of food price increases on Pakistani poverty levels is substantially greater than the impact of energy price increases. Second, the impact of food price inflation on Pakistani poverty levels is significantly higher for rural populations as compared to urban populations. Finally, food price inflation can lead to significant increases in Pakistani poverty levels: For Pakistan as a whole, a 20% increase in food prices would lead to an 8% increase in the poverty head count.

Keywords: Pakistan; Poverty; Inflation; Household Budget; Food; Fuel (search for similar items in EconPapers)
JEL-codes: D33 E3 R21 (search for similar items in EconPapers)
Date: 2008
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