Abstract
A rise in food prices reduces the real income of poor food buyers by a larger proportion than that of better off consumers, though the absolute reduction in real income is larger for the higher income consumers, because they spend more on food. This reduction in turn will reduce employment and income of the poor in those sectors on which the expenditure of the better off is reduced. The poor therefore suffer both directly, as a result of the increase in food prices, and indirectly, as a result of reduced employment in the production of e.g. livestock and vegetables, simple household goods, kitchen ware, bicycles, etc., because the expenditure of the better off has declined.
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Notes and References
John Mellor, ‘Food price policy and income distribution in low-income countries’, Economic Development and Cultural Change, vol.27 (October 1978) no. 1.
The part of food produced for consumption by the household of the grower can be quite large. From 1973–4 to 1977–8 the gross marketable surplus of rice in Bangladesh ranged from 19 per cent of gross production to 23 per cent. In 1973–4 about 77 per cent of the gross marketable surplus came from 15 per cent of the farms. (See Raisuddin Ahmed, ‘Agricultural rice policies …’, 1981.)
This group is not as small as is often tacitly assumed. In Thailand one-fourth of paddy farmers are net purchasers of rice. It follows that the incidence of increases in the price of rice is quite different from what it would be if it could be assumed that all rice producers benefit from a price increase. (See Prasarn Trairatvorakul, ‘The effects on income distribution and nutrition of alternative rice price policies in Thailand’, International Food Policy Research Institute, Research Report, no. 46, November 1984). In Bangladesh about 53 per cent of farm households, covering 41 per cent of farm population and 19 per cent of farm land, were net buyers of rice. (See Raisuddin Ahmed, ‘Agricultural price policies …’, 1981.)
See pages 14–17.
Prasarn Trairatvorakul, ‘Rice price policy and equity considerations in Thailand: distributional and nutritional effects’ (Washington, DC: International Food Policy Research Institute) and ‘The effects on income distribution and nutrition of alternative rice price policies in Thailand’, International Food Policy Research Institute, Research Report, no. 46, November 1984.
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© 1987 Paul Streeten
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Streeten, P. (1987). Incoine Distribution and Poverty. In: What Price Food?. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-18921-2_12
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DOI: https://doi.org/10.1007/978-1-349-18921-2_12
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