Economics

Higher food prices can reduce poverty and stimulate growth in food production

D. Headey and K. Hirvonen

This groundbreaking research challenges the belief that higher food prices lead to increased poverty. Conducted by Derek Headey and Kalle Hirvonen, the study reveals that in many middle-income countries, rising food prices may actually decrease poverty levels, especially in rural communities. Discover how agricultural supply responses and labor demands are reshaping economic landscapes in unexpected ways.

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Playback language: English

Index

Abstract

This paper investigates the impact of higher food prices on poverty and food production, challenging the conventional wisdom that higher food prices universally increase poverty. The authors analyze annual data from 33 middle-income countries between 2000 and 2019, finding that year-on-year increases in real food prices correlate with reductions in poverty rates, particularly in more rural and agrarian economies. This effect is attributed to the stimulation of short-run agricultural supply responses, leading to increased demand for unskilled labor and higher wages. The positive effects are less pronounced or even reversed in more urbanized countries.

Publisher

Nature Food

Published On

Aug 10, 2023

Authors

Derek Headey, Kalle Hirvonen

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