How does commodity price volatility affect the welfare of rural households in developing countries, for whom hedging and consumption smoothing are often difficult? And when governments choose to intervene in order to stabilize commodity prices, as they often do, who gains the most? This article develops an analytical framework and an empirical strategy to answer those questions, along with illustrative empirical results based on panel data from rural Ethiopian households. Contrary to conventional wisdom, we find that the welfare gains from eliminating price volatility are increasing in household income, making food price stabilization a distributionally regressive policy in this context.
That’s the abstract of an article Chris Barrett, David Just, and I have been working on since 2007, and which has just been accepted for publication by the American Journal of Agricultural Economics.
In this article, we ask the question: What is the effect on rural households of increasing the uncertainty (i.e., volatility) surrounding the prices of the staple crops they produce and consume, holding the levels of those same prices constant? In other words, we isolate the impact of an increase in the variance of a price distribution holding the mean of that price distribution constant, and we look at the effects of the covariance between each pair of prices, since a price never varies alone.
To answer those questions, we use publicly available survey data from rural Ethiopia and study the welfare impacts of volatility in the prices of coffee, maize, beans, barley, wheat, teff, and sorghum.
This article, I think, is my best piece of research so far, and it is not without reason that I used it as my job-market paper this year. It really has everything one wants one’s research articles to have:
Of Africa — and Writing
With the venerable Soyinka now 78, I wish I could report that his new volume of sweeping reflections is of the same stature as his best work, but sadly it is not. The book is vague, ponderous and awkward. Soyinka never says “house” when he can say “habitation,” “native” when he can say “autochthon,” “dominant” when he can say “hegemonic.” Phrases in quotation marks float free of any source. When he makes broad generalizations and criticisms he sometimes expects the reader to mentally provide specific examples. (Do you remember exactly what President Obama said in Cairo in 2009? I had to look it up.) The book abounds in passages full of 10-dollar words that have to be read two or three times to figure out what they mean. About contentions in Christian theology, for example, he says:
“These all-consuming debates and formal encyclicals are constructed on what we may term a proliferating autogeny within a hermetic realm — what is at the core of arguments need not be true; it is sufficient that the layers upon layers of dialectical constructs fit snugly on top of one another.”
That’s Adam Hochschild discussing Nigerian writer and 1986 Nobel laureate for literature Wole Soyinka‘s new book Of Africa in the New York Times Book Review.