Introduction Conceptual model Data Estimation methods and results Conclusions Food price shocks-induced poverty traps : An analysis using panel dataset from Uganda Adamon N. Mukasa 1 1 Department of Economics and Management, Catholic University of Bukavu FERDI Workshop, Cle r mont-Ferrand, June 24-25, 2015 Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Outline Introduction 1 Conceptual model 2 Data 3 Sample Construction of a food price shock variable Asset index Estimation methods and results 4 Parametric models of consumption and asset dynamics Testing of poverty traps Food price shocks-induced poverty traps? Conclusions 5 Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Introduction Given the recent global food price crisis of 2000s, fear of deterioration of welfare indicators: Food security Vulnerability to other types of shocks and stressors Risks of poverty traps or low well-being equilibrium Previous studies (Headey and Fan, 2008; Ivanic and Martin, 2008 ; Boysen, 2009; Hella et al, 2011; Vu and Glewwe, 2011;...) indicate the many households (even millions) might have been pushed into poverty Their limitations: Fail to theoretically and empirically links exposure to food price shocks and risks of poverty traps Use cross-sectional data Unable to account for household unobserved heterogeneity Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Introduction Given the recent global food price crisis of 2000s, fear of deterioration of welfare indicators: Food security Vulnerability to other types of shocks and stressors Risks of poverty traps or low well-being equilibrium Previous studies (Headey and Fan, 2008; Ivanic and Martin, 2008 ; Boysen, 2009; Hella et al, 2011; Vu and Glewwe, 2011;...) indicate the many households (even millions) might have been pushed into poverty Their limitations: Fail to theoretically and empirically links exposure to food price shocks and risks of poverty traps Use cross-sectional data Unable to account for household unobserved heterogeneity Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Introduction Given the recent global food price crisis of 2000s, fear of deterioration of welfare indicators: Food security Vulnerability to other types of shocks and stressors Risks of poverty traps or low well-being equilibrium Previous studies (Headey and Fan, 2008; Ivanic and Martin, 2008 ; Boysen, 2009; Hella et al, 2011; Vu and Glewwe, 2011;...) indicate the many households (even millions) might have been pushed into poverty Their limitations: Fail to theoretically and empirically links exposure to food price shocks and risks of poverty traps Use cross-sectional data Unable to account for household unobserved heterogeneity Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Objectives of the paper Objectives of the paper Model theoretically the link between exposure to food price shocks and welfare dynamics Uncover the effects of food price and asset shocks on welfare growth (consumption levels and asset holdings) Test the hypothesis of food price shocks-induced poverty traps Locate households’ welfare equilibrium levels Compare these equilibrium thresholds by households’ differential exposure to food price shocks Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Objectives of the paper Objectives of the paper Model theoretically the link between exposure to food price shocks and welfare dynamics Uncover the effects of food price and asset shocks on welfare growth (consumption levels and asset holdings) Test the hypothesis of food price shocks-induced poverty traps Locate households’ welfare equilibrium levels Compare these equilibrium thresholds by households’ differential exposure to food price shocks Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Objectives of the paper Objectives of the paper Model theoretically the link between exposure to food price shocks and welfare dynamics Uncover the effects of food price and asset shocks on welfare growth (consumption levels and asset holdings) Test the hypothesis of food price shocks-induced poverty traps Locate households’ welfare equilibrium levels Compare these equilibrium thresholds by households’ differential exposure to food price shocks Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Objectives of the paper Objectives of the paper Model theoretically the link between exposure to food price shocks and welfare dynamics Uncover the effects of food price and asset shocks on welfare growth (consumption levels and asset holdings) Test the hypothesis of food price shocks-induced poverty traps Locate households’ welfare equilibrium levels Compare these equilibrium thresholds by households’ differential exposure to food price shocks Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Objectives of the paper Objectives of the paper Model theoretically the link between exposure to food price shocks and welfare dynamics Uncover the effects of food price and asset shocks on welfare growth (consumption levels and asset holdings) Test the hypothesis of food price shocks-induced poverty traps Locate households’ welfare equilibrium levels Compare these equilibrium thresholds by households’ differential exposure to food price shocks Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Conceptual model Incorporate explictly food price and asset shocks in households’ optimization problem Maximization of expected lifetime utility: � ∝ ����� � c ; θ f � β t � � � � � θ f = E 0 u ( c t ) + v u ( c t ) − u c t | z c t , k t +1 U Max t t =0 subject to k t +1 = θ k t [ f ( k t ) + (1 − δ ) k t ] − c t k 0 given Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Conceptual model Incorporate explictly food price and asset shocks in households’ optimization problem Maximization of expected lifetime utility: � ∝ ����� � c ; θ f � β t � � � � � θ f = E 0 u ( c t ) + v u ( c t ) − u c t | z c t , k t +1 U Max t t =0 subject to k t +1 = θ k t [ f ( k t ) + (1 − δ ) k t ] − c t k 0 given Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Conceptual model Euler equation: U ′ � c t ; θ f � t � = θ k t +1 [ f ( k t +1 ) + (1 − δ ) k t +1 ] β E t U ′ � c t +1 ; θ f t +1 In case of food price shocks: U ′ � � ≡ u ′ ( c t ) � 1 + v ′ � � ��� c t ; θ f c t ; θ f g t t − u ′ � � �� � v ′ � � ��� � = u ′ � � �� θ f c t ; θ f θ f c t | z c t | z , ∀ t g t t t Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Data Estimation methods and results Conclusions Conceptual model Euler equation: U ′ � c t ; θ f � t � = θ k t +1 [ f ( k t +1 ) + (1 − δ ) k t +1 ] β E t U ′ � c t +1 ; θ f t +1 In case of food price shocks: U ′ � � ≡ u ′ ( c t ) � 1 + v ′ � � ��� c t ; θ f c t ; θ f g t t − u ′ � � �� � v ′ � � ��� � = u ′ � � �� θ f c t ; θ f θ f c t | z c t | z , ∀ t g t t t Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Sample Data Construction of a food price shock variable Estimation methods and results Asset index Conclusions Sample Uganda National Panel Surveys ( UNPS ) as part of LSMS and LSMS-ISA of World Bank Four waves: 2005/6, 2009/10, 2010/11, and 2011/12 Balanced panels of 2,173 households with complete information over 4 periods Attrition bias corrected through inverse probability weighting procedure (Fitzgerald et al, 1988; Wooldridge, 2002) Mukasa Food price shocks-induced poverty traps?
Introduction Conceptual model Sample Data Construction of a food price shock variable Estimation methods and results Asset index Conclusions Sample Uganda National Panel Surveys ( UNPS ) as part of LSMS and LSMS-ISA of World Bank Four waves: 2005/6, 2009/10, 2010/11, and 2011/12 Balanced panels of 2,173 households with complete information over 4 periods Attrition bias corrected through inverse probability weighting procedure (Fitzgerald et al, 1988; Wooldridge, 2002) Mukasa Food price shocks-induced poverty traps?
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