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May 06, 2008




this passage needs to be revised:

"...a World Bank study by Ivanic and Martin which argued that the poor would benefit from a rise in world prices in a clear majority of developing nations that these authors looked at."

Dani Rodrik

Melvin --

Thanks for the close reading. Correction done.


Might the differing results in the two studies arise from differences in the commodities examined? Most importantly, the Hertel et al piece includes price increases in cotton in its analysis, while the Ivanic and Martin does not.

There are also differences in methodology. Ivanic and Martin is a partial equilibrium analysis, but also considers unskilled wage effects. Hertel et al use a modified CGE framework.


A close look at the Hertel study shows that the "high prices are bad for the poor except under Doha" is still a hollow argument.

Hertel is right to model a "Doha scenario" and a "full liberalization" scenario in this paper and many other based on the same GTAPish model runs. The "Doha Scenario" looks fairly close to the deal on the table (which is far from fully liberalizing all tariffs and subsidies).

The "Doha Scenario" here would only bring 2.5 of the 622 million people living under $1 dollar per day over the poverty line (0.4 percent). You could argue that there are better, cheaper, less costly (the tariff revenue losses for developing countries under the deal on the table are $63 billion) ways to bring these folks above the poverty line.

Also, let us remember that the model runs can simply reveal bringing an individual from $1 per day to $1.01 dollars per day then shazam they are "out" of extreme poverty....


I would like to ask Prof. Rodrik if farm protectionism will help African countries to face the current world food crisis in the light of the following article:
Thank you!


I don't know what professor Rodrik thinks but I think this is really interesting! Ghana seems to be pursuing a similar strategy. And Mali has been very successful at promoting rice production. One problem in Ghana though is that people have become accustomed to the taste of imported rice and they complain that the domestic rice is of inferior quality. This seems like a problem that could be overcome. And promoting domestic rice production in Ghana would have a large impact on poverty reduction since most of the poorest people in Ghana live in the north where rice is grown.


Hertel and Martin your response leaves me more confused. If the estimates in the most recent paper are correct then the current rise in food prices will increase the global poverty headcount by more than 100 million. This is a huge effect, isn't it? How can it be that this effect is small enough so as to be more or less ignored (certainly not emphasized) in your previous work? Is it also because the magnitudes of the price changes are different? What is really going on here? And, BTW, what does the World Bank plan to do about it?

Richard H. Serlin

It's important to be very careful here with your measures here. For example, if you just use per capita GDP you may find that higher food prices mean higher per capita GDP because a small minority makes a lot more money even if there are far more people who plunge into dire poverty.

I know statistics are kept on the number of calories per day. If you could find whether when food prices go up, the percentage of the countries population on less than 1,200 calories per day goes up, that would be very valuable and non-misleading information. This is the kind of thing studies should look at so that they aren't misleading.

Richard Serlin


I forget the source (perhaps it was Rodrik himself), but a good rule of thumb seems to be that countries which are 'price takers' will be hurt by global price increases whilst those which are 'price makers' will tend to benefit, depending on the commodity.

The longer term political questions seem to be how governments will securitise food policy: Will they throw up export barriers and build stockpiles, beggaring thy neighbor? Will they strive for 'self-sufficiency' or autarky through import barriers, opening the door to politically-risky shortages? Will the current crisis help or hinder agricultural liberalisation in the Doha round?

Since food policy impinges much more directly on welfare than, arguably, energy policy, it's probably only a matter of time before the constraints of climate change, population growth and middle-class expectations make food policy more about competition than cooperation.

A recent spate of recent articles about China and the Middle East buying up producing land abroad will probably catalyse the issue...

Derek Headey

Dear Dani, I think one source of confusion in this issue is the difference between the size of the price change and the speed. A price rise spread out over 10 years is very different to one that occurs in the space of 2 0r 3 years in a market where supply responses are slow. The current rise constitues a crisis because the ability of governments and populations to reallocate resources to agriculture in the short run is very limited. I am not sure how this affects the Doha-round estimates, but Ivanic and Martin's methodology seems more appropriate for the current situation.

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Food prices are steadily going up, even in the States. Inflation rears its ugly head :*


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