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The price is not always right : on the impacts of (commodity) prices on households (and countries), Volume 1
Author:Lederman, Daniel; Porto, Guido; Collection Title:Policy Research working paper ; no. WPS 6858
Country:Latin America; Africa; Date Stored:2014/05/06
Document Date:2014/05/01Document Type:Policy Research Working Paper
SubTopics:Markets and Market Access; Economic Theory & Research; Emerging Markets; Labor Policies; Access to MarketsLanguage:English
Region:Africa; Latin America & CaribbeanReport Number:WPS6858
Volume No:1  

Summary: This paper provides an overview of the impact of once-and-for-all changes in commodity prices and other prices on household welfare. It begins with a collection of stylized facts related to commodities based on household survey data from Latin America and Africa. The data uncover strong commodity dependence in both continents: households typically allocate a large fraction of their budget to commodities and they often depend on commodities to earn their income. This income and expenditure dependency suggests sizable impacts and adjustments following commodity-price shocks. The paper explores these effects with a review of the literature. It studies consumption and income responses, labor-market responses, and spillovers across sectors. It ends up providing evidence on the relative magnitudes of various mechanisms through which commodity prices affect household (and national) welfare in developing economies.

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