Food Price Changes and Household Welfare: What Do We Learn from Two Different Approaches?

Luca Tiberti and Marco Tiberti

Journal of Development Studies, 2018, vol. 54, issue 1, 72-92

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.

Date: 2018
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DOI: 10.1080/00220388.2016.1269888

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