The net impact of higher wheat price on poverty in Pakistan

Abstract

Transnational food crises in 2007-2010 had a substantial impact on the socioeconomic status of many developing and under developing countries. The fear that a large proportion of the population spending considerable amount of their income on food items would become under-deprived. Though valid, yet these fears ignored that many of these poor households are, in fact, net food sellers hence they should have benefited from the surge in prices. This paper evaluates the immediate short-term influence of change of wheat price on poverty distributions, and socioeconomic welfare to wheat producers and consumers across rural and urban regions of Pakistan. This is achieved by setting counterfactual analysis on the basis of getting detailed information on households’ food consumption and production levels from four rounds of Household Integrated Economic Survey (2001/02, 2005/06, 2007/08 and 2010/11). The present analysis uses Net Benefit Ratio (NBR) to differentiate households into producers and consumers of wheat. The principal findings of this study are (a) Substantial proportion of Pakistan’s population is a net purchaser of wheat with a share varying widely between urban (94%) and rural (74%) areas. This high rise in food prices has in consequence created a massive increase in poverty. (b) Rural households are more vulnerable to this inflation in distinction to their urban counterparts, as the negative impact on net wheat consumers, especially those who are below the poverty line, outweighs the benefits to net wheat producers. This study therefore focuses on strategies to sabotage the effects of wheat price hike on the underprivileged segment of the population