An ex-ante analysis of the welfare effects of changes in international prices of agricultural commodities: the case of Uruguay

Paris

Conferencia; ETSG 2015 17TH ANNUAL CONFERENCE; 2015

ETSG UNIVERSITÉ PARIS 1 PANTHÉON-SORBONNE

With a large share of households with low and medium-low income, theincrease in agricultural commodity prices has the potential to hurt a sizable part ofthe population through a rise in the price of the consumption basket. Ex-ante this isthe case. A less obvious channel, through changes in labor income would be morebeneficial to middle-income households in Argentina and Uruguay, and to lowincomeones in Mexico. Overall, in Argentina and Mexico all households experiencelosses, between 3% and 7.5% of their initial expenditure in the former case, andbetween 10% and 12% in the latter. In both cases, poorer households are the mostaffected. In Uruguay, instead, households at the upper end of the distribution wouldbenefit with the increase in the international price of agricultural commodities, withlow-income households losing as much as 7.5%. In terms of poverty, the increaseswould be between 19% and 34%, with Uruguay being the most affected andArgentina the least. Increases in indigence would be even greater, between 29%(Argentina) and 52% (Mexico). Also, the results show that households in a situationof indigence and/or poverty, would move in average further away from the thresholdlines, meaning that within each category, poor and indigent households becomemore homogeneous among them.