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Cereal price shocks and volatility in sub‐Saharan Africa: what really matters for farmers’ welfare?

Magrini, Emiliano, Balié, Jean, Morales‐Opazo, Cristian
Agricultural economics 2017 v.48 no.6 pp. 719-729
developing countries, food consumption, food groups, grains, household surveys, income distribution, issues and policy, markets, prices, Sub-Saharan Africa
The lack of information as well as some misperceptions about the distinction between the welfare consequences of higher versus more volatile cereal prices has limited the effectiveness of policy interventions during the recent food crises in many developing countries. This article proposes an integrated empirical strategy to investigate and compare the different effects of these two phenomena and tests it using nationally representative household survey data from four sub‐Saharan countries. Results show that the negative impacts of a cereal price increase substantially outweigh the effects of price volatility on household welfare across the entire income distribution. The amplitude and the distribution of those effects depend heavily on specific factors, such as: the weight of food consumption over total expenditure; the budget share devoted to cereals; the substitution effect among food groups; and the relative number of net sellers versus net buyers accessing the market. We also show that volatility mainly harms the poorest quintile of the population.