distributional impact of the 2008 rice crisis in the philippines george manzano & aubren prado...
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Distributional Impact of the 2008 Rice Crisis in the Philippines
George Manzano & Aubren PradoUniversity of Asia & the Pacific
Manila, The Philippines
UNCTAD Virtual Institute Seminar on Trade and Poverty
Geneva, 8-10 September 2014
Policymakers
– Jerome Bunyi & Maria Araceli Albarece, Permanent Mission of the Philippines to the World Trade Organization
– Dr. Segfredo Serrano, Department of Agriculture of the Philippines
CONTEXT
CONTEXT
Context
• Rice: most sensitive food item– THE Staple– Major food expense for many households– Many farmers depend on rice farming
• … one of the most protected commodities
• … with a government office just to regulate trade in rice primarily
Context
• Philippines has generally been a net importer. Largest importer in 2008.
• Self-sufficiency in rice as a most challenging goal
• Talks of a no-import stance• Adds to the sensitivity
Food Price Spike2007-2008
• Volatile world rice market conditions– Low ending stocks– Export bans by certain countries
• ‘Herd’ reaction of importers
Source: Authors’ estimations, based on USDA (2013)
Context2008 Rice Crisis
World rice market, 1960-2012
Source: Authors’ estimations, based on BAS (2013)
Context2008 Rice Crisis
Monthly trends in rice prices, January 2007 – August 2009
CONTEXT
OBJECTIVES
Objectives of the Study
• Determine the distributional impact of the 2008 rice price shock in the Philippines.
What are the characteristics of the affected households?
Immediate Policy Context
• Why are we interested in knowing who are the vulnerable groups to a rice price spike?
Efficient targeting
Immediate Policy Context
• How to make use of the information?
– Measures to alleviate suffering– Food: time element is critical– Design for rapid mobilization of aid in the
future
Broad Policy Context
• Response is always a rationing exercise– Resources are always scarce compared to
the needs.– Cost-benefit of more permanent solution,
crisis prevention
CONTEXT
METHODOLOGY
Methodology
• In general, when price of a commodity rises– Producer gains (higher income)– Consumer losses (higher expense)
• Extent of benefits and costs varies in degrees– Benefit to household: share of rice income to
total income– Cost to household: share of rice expenses to
total expenditure
Vulnerability Indicator
Net Income Share of rice
Income Share of Rice Budget Share of Rice-
Methodology
• Distribution of Benefit/Cost on per capita expenditures
• Classify according to household groups– Gender of the HH head– Agricultural vs Non-agricultural– Urban vs Rural
Vulnerability of households
• Groups that are more vulnerable to shocks in rice prices:– In general, poorer households across groups– Non-agricultural than Agricultural– Urban than Rural– Female-headed than Male-headed
Methodology
• Simulation– Actual rice price changes– Adjustments for the difference in farm gate and
retail prices of rice– Price changes between the pre-crisis phase
(January 2007 to February 2008) and the crisis phase (March 2008 and September 2008)
• Construction of the Benefits/Costs variable
Source: Authors’ estimations, based on BAS (2013)
Context2008 Rice Crisis
Monthly trends in rice prices, January 2007 – August 2009
Methodology
Constructed a Benefits/Cost Variable (BC)
Change in farm gate prices
X Rice Income Share
Change in retail prices
XBudget Share of Rice
-
Methodology
Constructed a Benefits/Cost Variable (BC)
BC =
[a(rice income share) – rice budget share] x [change in retail price]
where a is the ratio of average rates of changes in farm gate and retail prices
CONTEXT
FINDINGS
Characteristics of the Sample
All Households: 38,400
Male 80%
Female20% Urban
45%Rural55%
Agri26%
Non-
Agri74%
Source: Authors’ calculations, based on the 2009 FIES
Structure of the Sample
Source: Authors’ calculations, based on the 2009 FIES
Source: Authors’ estimations, based on the 2009 FIES and BAS (2013)
Benefits/costs by gender of household head
(controlling for per capita expenditure)
Source: Authors’ estimations, based on the 2009 FIES and BAS (2013)
Benefits/costs by level of urbanity(controlling for per capita expenditure)
Source: Authors’ estimations, based on the 2009 FIES and BAS (2013)
Benefits/costs by Agricultural HH indicator
(controlling for per capita expenditure)
Distributional impact of the 2008 crisis by region
Top 5 Gainers
• Central Luzon• Cagayan Valley• Central Visayas• Autonomous
Region of Muslim Mindanao
• Ilocos Region
Top 5 Losers
• National Capital Region
• CALABARZON• Central Luzon• Western Visayas• Central Visayas
CONTEXT
CONCLUSIONSANDPOLICY RECOMMENDATIONS
Conclusions
• The effect of a rice price shock is regressive.
• Across HH per capita income, those affected more were– Female-headed HHs– Urban HHs– Non-agricultural HHs
• Geographical differences in gainers/losers
Policy Implications
• More efficient targeting exercise for safety net measures– Conditional Cash Transfers – NFA subsidized rice
Future Directions
Access to better data on rice income per household
Effects of rice changes on wages and inflation: second-order effects
Thank you!
George Manzano & Aubren Prado
University of Asia & the Pacific
Manila, The Philippines