Agricultural Growth:
How Technological Change and Economic
Integration Contributed to Improve Income
Distribution in Brazil
Geraldo Barros
University of São Paulo
Brazil’s structural problems:
Income inequality & poverty
• Brazil still holds strong undesirable structural
characteristics
– Very high inequality of income distribution
– Very high rate of poverty rate
•
that historians link to the colonial and the imperial period
from 1500 through the XIX century.
– Indian and African slavery
– Colonization under restricted access to land – land
concentration
• The characteristics still holds due to the lack of appropriate
of effective corrective or compensating policies directed to
better land distribution, improve education, health, and so on.
Some improvements only in the 1990s
• But in the 1990s income inequality and
poverty began to slightly decrease as
– High inflation was controlled
– Government implemented pro-poor programs,
such as income transfer.
– Agricultural production increased at decreasing
prices with growing exports
• We focus on the role of this 3rd factor as a
necessary condition for the observed changes
Agriculture in Brazil
Historic perspective
Agriculture is historically penalized
to benefit industry
• From the 1930s to the 1980s, Brazil implemented a
development project based on industrialization and
urbanization plus frontier land occupation with strong
participation of the public sector.
• The strategy of import substitution involved a collection of
exchange rate, fiscal and trade policy instruments that as a
rule distorted market prices penalizing agriculture.
• Even though, to agriculture was assigned important role both
as supplier of cheap food and raw materials and as a provider
of foreign currency.
Industry grows at 7.4% per year for 50 years
• The resulting industrialization process was
impressive from 1930 to 1980:
– Brazil’s GDP increased at the annual average rate
of 6.5%.
– Industry GDP expanded at an impressive annual
rate of 7.4%
– Agriculture increased at 3.2%.
– Rural population share reduced from 69% to 32%.
Farm GDP and Brazilian GDP (%) 1930/1980
Farming
Total
Growth with income inequality and
poverty
• Economic growth was associated with high
income inequality at least since the 1960,
when the Gini Index was around 0.54. This
index increased up to 1990, reaching 0.61.
• The proportion of poor(<US$90/month) in the
Brazilian population increased from 40% (41
million people) in 1977 to 50% in 1984
Brazilian Gini Index of Income
Inequality – 1960/90
Neri (2012)
Proportion of Extremely Poor
and Poor in Brazilian Population
1977-1990
Paes de Barros, Henriques, Mendonça (2001)
Agricultural markets were highly distorted
in Brazil
• Up to the 1960/70s a set of market distorting,
agriculture penalizing, instruments was in
place:
– overvalued currency,
– export taxation,
– production and price control of some important
ag. goods
– and higher prices of domestically produced farm
machinery and inputs
Agricultural policy to compensate for industrial
policy
• 1960/70s: While keeping the main agricultural
taxation, a new set of specific agricultural policy
was created
• output minimum price support and storage programs,
• subsidized credit for modern inputs and machinery
• rural labor cost was artificially raised as urban labor
legislation was extended to the rural sector
• the creation of national agricultural research system
was strategic particularly for the cerrado region
• A sort of agriculture modernization and
comparative advantage were being created
Agricultural incentives are unsustainable
Brazil joins the liberalization wave
• However, since the late eighties, except for the
funds for research and development, the
agricultural support apparatus began to be
dismounted.
– Official rural credit by unit of agricultural GDP, which
had increased threefold during the 1970s peaking in
1980, decreased 90% to its bottom value in 1995.
– Real interest rate ceased to be negative since the early
nineties
– Agriculture public expenditure was also curtailed
beginning in the late eighties from 12% of total public
expenditures to 1% in 2000.
Agricultural incentives are unsustainable
Brazil joins the liberalization wave
• Several public commodity institutes - coffee, sugar and
alcohol, cocoa and wheat - which controlled production
and prices were deactivated so that commerce and
market forces prevailed from then on.
• Some liberalization is implemented
–
change in trade policy :
• reduced export control and average effective tariff
from 68% to 39% and then to 15%
• exports of agricultural products became exempted
of the 13% value added tax.
• exchange rate regime moved to dirty floating
Agr. nominal rate of assistance
Lopes, M. et al (2007)
Liberalization with plunging
international prices
• As Brazilian agriculture is liberalized, international
prices themselves were in deep decline
– Over the last 30 years to 2006, real output prices
experienced a substantial fall, a change that
originated in the international markets.
– A severe drop in international prices took place during
the eighties and has been attributed to
• escalating interest rate,
• appreciation of the US dollar,
• but perhaps in larger proportion to what became
known as "subsidy war" between the United States and
the European Community
Real International Food Price
(1977-1979 = 100)
Anderson K Phil. Trans. R. Soc. B 2010;365:3007-3021
International price fall is transmitted to
Brazilian farmers
• The world real dollar price of food decreased 70% from
1975 to 2000 and 60% only until 1990.
• Brazilian farmers also experienced a substantial drop in
real prices – more than 60% over the 1975 to 2000
• Spolador, Barros and Bacchi (2011) estimated the
elasticity of transmission relating international food
(CRB) prices and Brazilian farm prices (for both
tradable and non tradable goods) to be between 0.6
and 0.8.
• The impact of real exchange rate on domestic farm
prices was estimated correspond to an elasticity
between 0.4 and 0.6.
Real domestic and international
food prices
FGV, FIPE, IMF
Agricultural output grows with important role
for PTF
• Since 1975 to 2010 land use for crops increased
1,5% per year, tractor stock grew at 3,2% and
fertilizer use expanded at 4.2%
• Total agric. factor productivity (PTF) annual
growth rate is estimated to have been between
3.2% to 3.7%
• Industry growth rate was only 1.2%, the rate for
agriculture was almost the triple (3.4%).
• From 1980 to 2010, the rural population share
fell by half: from 32% to 16%.
International price fall is transmitted to
consumers
• Brazilian consumers - specially the (urban?) poor
probably benefited from agriculture's
performance as far as the huge fall in prices was
accompanied by an expressive growth in
production.
• Retail food price also fell 60% from 1975 until
2000, and 80% until 2006.
• That result indicates that agribusiness
(agroindustry and retail sectors, as well as
farmers), contributed to the reduction of
agricultural prices to consumers
Agribusiness and Income
Inequality and Poverty
Government Transfer Programs
and
Productivity Growth and Market
Transfers
Agribusiness and Poverty
• Because the performance of agribusiness
affects directly the welfare of the poor, this
sector probably has had an important role in
the evolution of income distribution and
poverty in Brazil.
• This probable contribution of the sector has
not been duly acknowledged in the literature.
Income inequality and poverty fall in the
1990s/2000s
• In 1992 the proportion of extreme poverty in
Brazil was 35% and fell to 15% in 2009.
• In 1992 the proportion of poor in Brazil was 35%
and fell to 15% in 2009
• Gini Index of Income fell from 0.61 in 1990 to
0.52 in 2012
• According to FAO, between 1990/92 to 2004/06
the proportion of undernourished in total
population has decreased from 20% to 16% in the
developing world. In Brazil specifically that share
fell from 10% to 6 %.
Gini Index of Income Inequality
Current (usual) Interpretation
• According to Paes de Barros(2010):
– 60% of the reduction in inequality due to better
labor income distribution and 40% due to changes
non labor income (including transfer programs)
– Poverty reduction is related to the same factors,
but the relative importance of each is now 41%
and 51%, respectively.
– Non labor income has been augmented by
government programs
Income transfer programs
• Since the early 1990 the government implemented
several income transfer instruments to alleviate
poverty.
– The social security system was extended to the rural
sector, benefiting some 8 million people with at least the
minimum wage.
– Both poor elders and poor physically disabled - making up
almost 4 million people - were granted a minimum wage
income.
– The Family Grant program (Bolsa Família) benefits more
than 12 million families with per capita income lower than
US$70/month particularly in the poor areas of Northern
and Northeastern Brazil.
Income transfer programs
The real minimum wage finally increases in the
1990s possibly because this time food prices are
stable or falling
• The minimum wage is effective in the formal sector of the
economy and in farming
• It is also the floor benefit for the retirement and pension
system in Brazil.
– Since 2000, the Brazilian economy is growing at an average
annual of 3.8%, compared to 2.5% since 1980. That was enough
to put today´s economy on the verge of full employment (5%)
with the service sector leading the growth process.
Nominal and real minimum wage changes vs
consumers’ food price
Real
M.W. &
food prices
Nominal
MW changes
Nom MW changes
Real MW
Real FP
Alternative Interpretation
The effects of growth and relative prices
• A two sector economy: agribusiness(A) and non agribusiness
(N)
• Sectors differ regarding growth pattern, technological change
is exogenous
• Relative prices (PA/PN)are exogenous, depending on external
prices and domestic costs and market distorting policies
• Rural (R)and urban (U) households differ regarding sources of
income
• Households are divided into: low-income (LIH) and others (O)
• Overtime welfare or consumption pattern changes according
to each sector growth and relative price evolution.
Income and transfers due to relative price changes and
output growth and supply side changes
• We analyze the evolution of Agricultural and
Agribusiness GDP since 1995, when consistent data
became available
– a period of milder – than in the 1980s - fall in these
sectors’ real prices
– to measure the income transfer from this sector to society
in general (not only to the poor) due relative price changes
– transfer is defined as the sector’s loss/gain of income
compared to what income would otherwise be if real
(relative) prices had remained constant.
– for a given price change the amount transferred increases
with output
Supply side changes
• Bragagnolo, Spoldor and Barros (2011) – for instance using a stochastic frontier procedure estimated that
the Brazilian agricultural total factor productivity (TPF)
increased at average annual rate of 3.2% from 1975 to
2005.
• At regional level, Northern and Center Western states
presented the highest growth rates - most of them
above 6% and approaching 10% in several cases
• PTF shocks explained around 70% of the forecast error
variance of agricultural output during at least the next
10 periods.
Supply side changes
• PTF explanation of output was dominant in
the eighties and remained positive until 2000.
Currently PTF growth is smaller and oscillatory
• Output growth has been inhibited by
– low investment (as the rest of the economy)
– slower land expansion (lack of infrastructure and
environmental causes)
– both of these trends are slightly reversing in
recent years thanks to special agric investment
credit by BNDES (Federal Gov Investment Bank)
Agricultural GDP historical decomposition
Output forecast errors (red) and forecast error due to PTF shocks (dotted)
Source: Bragagnolo & Barros(2011
Agricultural GDP historical decomposition
Output forecast error (red); forecast error due to capital shocks (blue dotted),
forecast error due to land shocks (red dotted)
Source: Bragagnolo & Barros (2011)
Transfers concepts
A 2-sector (A and N) economy has a GDP at current prices given by
GDPt  X t Pt  X At PNt  X Nt PNt
t
XA is a row vector of (kA x1) agribusiness goods and services and XN
is a (kNx1) of non agrib g&s. Ps are correspondent column price vectors
GDP in period (t+j) at period t prices is
GDPt t j  X t  j Pt  X At  j PAt  X Nt  j PNt
Real GDP growth between t and (t+j) is
GDPt t j  GDPt
t
Transfers concepts
Let t  j 
X t  j Pt  j
be the GDP deflator between (t+j) and t
X t  j Pt
Agrib real GDP in period (t+j) at period t prices
GDPt tj j
t  j
 X t j
Pt  j
t  j

 X t  j Pt  GDPt t j



PAt  j
PNt  j
 X

X

At  j
Nt  j

t  j
t  j

 GDPAt (t j j )  GDPNt (tj j )
Transfers concepts
GDPt t j 
GDPt  j
t j
0
t  j
[GDPAt (t  j )  GDPNt (t  j ) ]  [
[GDPAt (t  j ) 
X At  j [ PAt 
GDPAt (t j j )
t  j
PAt  j
t  j
GDPAt (t j j )
t  j

]  [GDPNt (t  j ) 
]  X Nt  j [ PNt 
PNt  j
t  j
GDPNt (tj j )
t 1
GDPNt ( tj j )
t  j
]0
TrA(t  j )  TrN (t  j )  0
Tr is transfer in (t+j) at period t prices
]0
]
An illustration for the Brazilian Case
1995/2010
Agribusiness Relative Prices
Real GDP Indices for Brazilian Economy and
Agribusiness Sectors(1995/2010)
YEAR
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
INPUT
100,00
102,44
105,81
107,38
112,41
117,03
121,52
129,46
137,43
141,95
141,40
145,07
152,84
155,45
152,20
161,13
FARM
100,00
101,72
104,87
105,89
112,47
117,19
124,40
130,54
141,97
148,86
150,51
156,47
164,65
176,05
173,33
185,29
Source: IBGE/CEPEA
AGOINDUSTRY
100,00
104,76
106,06
103,42
104,42
104,04
106,29
108,91
111,76
118,23
121,71
125,57
135,98
143,54
138,16
140,76
DISTRIBUTION
100,00
104,02
105,84
105,02
107,22
108,06
111,75
115,32
119,54
126,11
129,55
132,95
141,66
148,05
143,90
149,61
AGRIBUS
100,00
103,60
105,70
104,92
108,05
109,73
113,81
118,07
123,88
130,28
132,91
137,08
146,22
153,77
149,68
156,17
Real Price Agribusiness Sectors’ GDPs
(106BR$ of 2007)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
TOTAL
INPUTS
43177
44231
45686
46365
48534
50530
52467
55895
59338
61288
61051
62638
65993
67118
65715
69569
899594
FARM AGROIND DISTRIBUTION AGRIB
122609
180037
168452
514275
124713
188603
175223
532770
128577
190949
178347
543763
129830
186201
177129
540487
137898
187990
181260
557933
143684
187319
183242
568442
152522
191364
190163
591566
160055
196071
196849
615882
174062
201208
206110
651904
182516
212856
217102
683942
184536
219131
222053
694219
191841
226074
228868
717531
201875
244813
242727
761059
215856
258433
255666
802185
212514
248749
249982
784913
227185
253420
262932
828019
2690273 3373220
3336107
10388890
Source: Silva & Barros
Values in 2007 Brazilian Reais (US$1=BR$1.95)
Agribusiness transfers
(106BR$ of 2007)
year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
TOTAL
INPUT
0
587
2640
758
-1020
-525
-653
-5002
-9168
-8169
-1349
1913
-2619
-13710
-6440
-6338
-49094
FARM
0
6776
12317
6321
14530
21374
24590
16896
13977
23813
41307
51664
44620
35529
45419
41731
400866
AGROIN
0
16475
17846
22216
19564
17170
22503
17383
17399
19761
25785
27284
37371
45539
44133
47501
397931
DISTR
0
6553
14407
11819
9734
14762
18383
10678
7045
16155
28197
28549
27632
24178
25597
33014
276703
AGRIB
0
26840
42306
36124
44276
54281
68423
46662
45485
62032
101277
121905
118425
107803
129947
145249
1151035
Agribusiness transfers (% GDP)
year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
TOTAL
INPUT
0%
1%
6%
2%
-2%
-1%
-1%
-9%
-15%
-13%
-2%
3%
-4%
-20%
-10%
-9%
-5%
FARM
0%
5%
10%
5%
11%
15%
16%
11%
8%
13%
22%
27%
22%
16%
21%
18%
15%
AGROIN
0%
9%
9%
12%
10%
9%
12%
9%
9%
9%
12%
12%
15%
18%
18%
19%
12%
DISTR
0%
4%
8%
7%
5%
8%
10%
5%
3%
8%
13%
13%
12%
10%
11%
13%
8%
AGRIB
0%
5%
8%
7%
8%
10%
12%
8%
7%
9%
15%
17%
16%
14%
17%
18%
11%
Agribusiness transfers
• Agribusiness transferred R$1.15 trillion over the
15 year-period (11% GDP)
• The input sector received R$49 billion (-5% GDP)
• The farm sector transferred R$401 billion (15%
GDP)
• Agroindustry transferred R$398 billion (12% GDP)
• Distribution sector transferred R$277 billion (8%
GDP)
External and domestic transfers
)
Write
TrAt  j  [(GDP
t
A( t  j )
 TB
t
A( t  j )
)(
GDPAt (t j j )
t  j

TBAt (tj j )
t  j
)]  [TB
t
A( t  j )

TBAt (tj j )
t  j
]
where TB = trade balance
TrAt  [ ABAt ( t 1) 
ABAt (1t 1)
t 1
)]  [TB At ( t 1) 
TB At (1t 1)
t 1
]
AB is domestic absorption
The first tem in brackets is domestic transfer and the second is external transfer
(to foreign residents). The sum of both is total transfer.
Indices of domestic and internalized export
farm prices
Indices of domestic and internalized export
agroindustry prices
Agribusiness Trade Balance, 1995/2010
(106BR$ of 2007)
YEAR
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
TOTAL
FARM
11458
7116
10014
6202
8446
7669
22081
21003
24942
32003
30573
32683
39160
37612
43384
48487
382833
AGROIND
25844
30235
32360
39256
57628
47922
72137
83273
95641
117836
132461
132212
136645
136423
139726
145704
1425302
Source: Silva & Barros
Values in 2007 Brazilian Reais (US$1=BR$1.95)
TOTAL
37302
37351
42373
45459
66074
55591
94218
104276
120583
149839
163034
164895
175805
174034
183110
194191
1808135
Farm , Industry and Agribusiness
External Transfers (1000BR$ of 2007)
FARM
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
TOTAL
0
-3275
-6882
-5799
-16621
-13365
-13854
-21614
-23871
-37391
-25566
-23496
-23213
-38877
-36678
-12471
-302973
INDUSTRY
0
6757
10156
15512
644
472
411
2569
-1897
-119
20867
10276
27308
26057
49262
55438
223711
AGRIB
0
3482
3274
9713
-15977
-12893
-13443
-19045
-25769
-37510
-4698
-13220
4095
-12820
12584
42967
-79261
Source: Silva & Barros
Values in 2007 Brazilian Reais (US$1=BR$1.95)
Farmers received a transfer
of BR$303 billion from abroad
while Agroindustry transferred
BR$234 billion.
Agrib received a net transfer of
BR$79.3 billion from abroad
Transfers From Agribusiness To Domestic
And Foreign Residents(1000BR$ of 2007)
TRANSFER TO
TRANSFER FROM
DOMESTIC RESID FOREIGN RESID TOTAL AGRIB
1995
0
0
0
1996
23358
3482
26840
1997
39032
3274
42306
1998
26410
9713
36124
1999
60253
-15977
44276
2000
67174
-12893
54281
2001
81867
-13443
68423
2002
65707
-19045
46662
2003
71254
-25769
45485
2004
99542
-37510
62032
2005
105975
-4698
101277
2006
135126
-13220
121905
2007
114329
4095
118425
2008
120624
-12820
107803
2009
117363
12584
129947
2010
102282
42967
145249
TOTAL
1230296
-79261
1151035
Source: Silva & Barros
Values in 2007 Brazilian Reais (US$1=BR$1.95)
Agribusiness transferred (lost)
BR$1.15 trillion, but
domestic residents
received more than that:
BR$1.23 trillion.
That means that agrib.
transferred BR$1.23 trillion,
but was partially
compensated with a
transfer from foreign
residents.
Transfers From Farmers To Domestic
And Foreign Residents(1000BR$ of 2007)
TRANSFER TO
TRANSFER FROM
DOMESTIC RESID FOREIGN RESID FARM SECTOR
1995
0
0
0
1996
10051
-3275
6776
1997
19199
-6882
12317
1998
12120
-5799
6321
1999
31151
-16621
14530
2000
34739
-13365
21374
2001
38444
-13854
24590
2002
38510
-21614
16896
2003
37848
-23871
13977
2004
61204
-37391
23813
2005
66873
-25566
41307
2006
75160
-23496
51664
2007
67833
-23213
44620
2008
74407
-38877
35529
2009
82098
-36678
45419
2010
54202
-12471
41731
TOTAL
703839
-302973
400866
Source: Silva & Barros
Values in 2007 Brazilian Reais (US$1=BR$1.95)
Farmers transferred
BR$401 billion, but
domestic residents
Received BR$704billion.
That means that farmers
transferred BR$ 704 billion.
but were partially
compensated with a
transfer from foreign
residents of BR$303 billion
Transfers From Agroindustry To Domestic
And Foreign Residents(1000BR$ of 2007)
TRANSFER TO
TRANSFER FROM
DOMESTIC RESID FOREIGN RESID AGROIND SECTOR
1995
0
0
0
1996
9718
6757
16475
1997
7689
10156
17846
1998
6705
15512
22216
1999
18920
644
19564
2000
16699
472
17170
2001
22092
411
22503
2002
14814
2569
17383
2003
19296
-1897
17399
2004
19881
-119
19761
2005
4918
20867
25785
2006
17009
10276
27284
2007
10063
27308
37371
2008
19482
26057
45539
2009
-5129
49262
44133
2010
-7937
55438
47501
TOTAL
174220
223711
397931
Source: Silva & Barros
Values in 2007 Brazilian Reais (US$1=BR$1.95)
Agroindustry transferred
BR$398 billion, but
domestic residents
Received BR$174billion.
That means that agroindustry
transferred additional BR$ 224
billion to foreign residents
Effects of Changes in Sectoral Output and Prices on
Household Consumption 1995/2010
• How the transfer public & private ended up being distributed
between the income classes of Brazilian society?
• Ultremare & Barros calculated what would be change in
consumption of domestic residents considering the changes
in relative prices and real GDP growth in agribusiness and non
agribusiness sectors from 1995 to 2010.
• The simulation considers low income households (LIH) - not
necessarily poor - and the rest of population (OTHERS) living
in rural (R) and urban (U) areas.
• Household budget microdata (IBGE) from 1995 to 2009 were
used to estimate composite (agribusiness and non
agribusiness) price and income (expenditure) demand
elasticities using Alston, Foster & Green Laids method.
Effects of Changes in Sectoral Output and Prices
on Consumption (1995/2010)
For instance, the relative change in rural low income
household consumption of agribusiness goods is given by
RL
dCARL
RL dPA
RL dPN
RL dY
  AA
  AN
  AY RP
C ARP
PA
PN
Y
 [ AARL   A AYRL ]
dP
dX
dPA
dX
RL
 [ AN
 (1   A ) AYRL ] N  ( A AYRL ) A  ((1   A ) AYRP ) N
PA
PN
XA
XN
The price effect on consumption includes in addition to the
Marshallian price effect the value of output price effect.
The proportions of agribusiness (and non agrib. ) incomes
going to both rural (λAR=48%) and urban (λAU= 18%)
households were kept constant along the period. The
elasticity matrix estimated was
Parameters and data for simulation
Elasticity matrix
CATEGORY
R LIH
R OTHERS
U LIH
U OTHERS
n aa
n ay
-0,291
-0,656
-0,598
-0,657
0,989
1,042
0,584
0,854
n an
n na
-0,698
-0,387
0,015
-0,197
n nn
0,012
0,157
0,030
-0,069
n ny
-1,017
-1,147
-1,169
-0,960
Price and income accumulated changes (%)
VARIABLE
PA
PN
AGRIB INCOME
NON AGRIB INCOME
RURAL INCOME
URBAN INCOME
1995/2006 2006/2010
-15,0
10,0
17.6
39.5
30,0
34,6
31,7
-8,0
15.4
18.4
17,0
17,9
LOW INCOME <US$667 32% POP
1,005
0,989
1,139
1,029
Effects of Changes in Sectoral Output and Prices on
Agribusiness Goods Consumption (1995/2010)
1995/2006
AGRIBUSINESS CONSUMPTION CHANGE (%)
TOTAL EFFECT
EFFECT OF P A
R LIH
26,7
-2,8
4,4
-7,1
-3,2
16,5
16,3
R OTHERS
38,8
2,3
9,8
-7,5
2,0
17,3
17,2
U LIH
34,9
7,4
9,0
-1,6
8,7
3,6
15,2
U OTHERS
43,9
7,6
9,9
-2,3
8,9
5,3
22,2
CATEGORY
Marshall P Effect Output P Effect EFFECT OF P N EFFECT OF X A EFFECT OF X N
2006/2010
AGRIBUSINESS CONSUMPTION CHANGE (%)
TOTAL EFFECT
EFFECT OF P A
R LIH
20,6
1,8
-2,9
4,8
1,5
8,1
9,2
R OTHERS
15,8
-1,5
-6,6
5,0
-0,9
8,5
9,7
U LIH
1,5
-4,9
-6,0
1,1
-3,9
1,8
8,6
U OTHERS
6,1
-5,0
-6,6
1,5
-4,0
2,6
12,5
CATEGORY
Marshall P Effect Output P Effect EFFECT OF P N EFFECT OF X A EFFECT OF X N
Effects of Changes in Sectoral Output and Prices on Non
Agribusiness Goods Consumption (1995/2010)
1995-2006
NON AGRIBUSINESS CONSUMPTION CHANGE (%)
TOTAL EFFECT
EFFECT OF P A
R LIH
17,1
-7,4
-0,2
-7,3
R OTHERS
12,1
-9,5
-2,4
U LIH
29,0
-3,5
U OTHERS
29,4
-1,7
CATEGORY
Marshall P Effect Output P Effect EFFECT OF P N
EFFECT OF X A
EFFECT OF X N
-8,7
16,7
16,5
-7,1
-11,1
16,5
16,3
-0,4
-3,1
-4,1
7,1
29,6
1,0
-2,8
-2,0
6,4
26,8
2006-2010
NON AGRIBUSINESS CONSUMPTION CHANGE (%)
TOTAL EFFECT
EFFECT OF P A
R LIH
26,5
5,0
0,1
4,8
R OTHERS
28,7
6,3
1,6
U LIH
24,4
2,3
U OTHERS
20,3
1,2
CATEGORY
Marshall P Effect Output P Effect EFFECT OF P N
EFFECT OF X A
EFFECT OF X N
4,0
8,2
9,3
4,8
5,1
8,1
9,2
0,3
2,0
1,9
3,5
16,7
-0,7
1,9
0,9
3,1
15,1
Annual change in consumption
1995/2006 – 2006/2010
AGRIB CONS
CATEGORY
1995/2006
R LIH
2,18%
R OTHERS
3,03%
U LIH
2,76%
U OTHERS
3,37%
2006/2010
4,79%
3,72%
0,37%
1,49%
NON AGRIB CONS
CATEGORY
1995/2006 2006/2010
R LIH
1,45%
1,56%
R OTHERS
1,04%
1,74%
U LIH
2,34%
1,40%
U OTHERS
2,37%
1,10%
Effects of Changes in Sectoral Output and Prices
on Consumption (1995/2010
• Results suggest that:
– Agrib. price fall between 1995 to 2006 had a small
effect on consumption of rural poor because of the
income effect of output price
– Government transfer programs may have helped in
compensating for this negative income effect of agrib.
price falls
– Agrib price falls benefitted more urban households
(not necessarily the poor)
– Direct income – due agrib and non agrib. output
growth - had the dominant effect