Access the Short-Term and Medium-Term Welfare Effects of Higher Food Prices
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Question

What is the effect of a price change on households before they have a chance to respond to the new prices?

Short-run Net Benefit Ratio Analysis

Uses household survey data to estimate the short-run impact of a price change on the welfare of different types of households.

Data Requirements

  • Nationally representative household survey data that includes the value of purchases and sales of the commodity and total income or consumption expenditure.
  • Estimate of percentage change in commodity price

Variables
i commodity
Δ y/y proportional change in household welfare (usually expressed in terms of the value of household consumption)
fi share of income from the sale of i
si share of expenditure going to the purchase of i
Δ pi / pi proportion change in the price of i
( fi – si ) net benefit ratio, the ratio of net sales of i divided by household income or expenditure

Output

Estimates of the short-term percentage change in welfare for different types of households as a result of the price change. Can be considered the short-term elasticity of welfare with respect to price of a commodity.

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