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Food for fuel: The effect of the US biofuel mandate on poverty in India

Ujjayant Chakravorty, Marie-Hélène Hubert and Beyza Ural Marchand ()

No 825, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: More than 40% of US grain is used for energy due to the Renewable Fuels Mandate (RFS). There are no studies of the global distributional consequences of this purely domestic policy. Using micro-level survey data, we trace the e ect of the RFS on world food prices and their impact on household level consumption and wage incomes in In- dia. We rst develop a partial equilibrium model to estimate the e ect of the RFS on the price of selected food commodities - rice, wheat, corn, sugar and meat and dairy, which together provide almost 70% of Indian food calories. Our model predicts that world prices for these commodities rise by 8-16% due to the RFS. We estimate the price pass-through to domestic Indian prices and the e ect of the price shock on household welfare through consumption and wage incomes. Poor rural households suffer signif- icant welfare losses due to higher prices of consumption goods, which are regressive. However they bene t from a rise in wage incomes, mainly because most of them are employed in agriculture. Urban households also bear the higher cost of food, but do not see a concomitant rise in wages because only a small fraction of them work in food- related industries. Welfare losses are greater among urban households. However, more poor people in India live in villages, so rural poverty impacts are larger in magnitude. We estimate that the mandate leads to about 26 million new poor: 21 million in rural and five million in the urban population.

Keywords: Biofuels; Distributional effects; Household welfare; Renewable Fuel Stan- dards; Poverty (search for similar items in EconPapers)
JEL-codes: D31 O12 Q24 Q42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-ene
Date: 2018
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Related works:
Working Paper: Food for Fuel: The Effect of the US Biofuel Mandate on Poverty in India (2018) Downloads
Working Paper: Food for fuel: The effect of the US biofuel mandate on poverty in India (2018) Downloads
Working Paper: Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India (2015) Downloads
Working Paper: Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India (2015) Downloads
Working Paper: Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India (2015) Downloads
Working Paper: Food for Fuel: The Effect of the US Biofuel Mandate on Poverty in India (2012) Downloads
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