The impact of a large rice price increase on welfare and poverty in Bangladesh

Author name: 
Syed Abul Hasan

This paper studies the effect of a sharp rice price increase on welfare and poverty in Bangladesh. We employ household expenditure information to estimate the welfare loss induced by the price increase. Our findings suggest that we underestimate the proportionate welfare loss for the rice producing households and overestimate that of the households who do not produce rice, if we ignore indirect effects arising from a change in household consumption and production behaviour. Our estimates further support the hypothesis of a quadratic relationship between welfare loss and permanent household income. We also demonstrate that higher rice prices either increase or decrease the poverty head-count ratio, depending on the choice of the poverty line. However, if we consider the per capita income gap as a measure of poverty, we always observe that higher rice prices unambiguously increase poverty.

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