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Working Paper

The Price Is Not Always Right : On the Impacts of Commodity Prices on Households (and Countries)

LIVING STANDARDS RETAIL PRICE MARKET STRUCTURE SUBSTITUTION PRODUCTION PRICE INCREASES SUNK COSTS NATIONAL ECONOMY SALES INCOME PERFECT COMPETITION UTILITY MAXIMIZATION EXPORTS ELASTICITY PRICE INDICES WELFARE RISK PREMIUM LABOR” MARKET INCENTIVES EQUILIBRIUM DISTRIBUTION WAGE DETERMINATION VARIABLES TRADE REFORMS PRICING PRICE REAL INCOME INPUTS WEALTH INFLATION RETAIL TRENDS DEVELOPMENT EXPORT BARRIERS LABOR MARKET DEMAND ANALYSIS COSTS MARKET REFORMS DEVELOPMENT ECONOMICS PRICE VOLATILITY PRODUCTS EXCHANGE RATES ECONOMETRICS FAILURES IMPERFECT COMPETITION MARKET LIBERALIZATION PRICE DECLINES INCOME EFFECTS MARKETING MARKETS FINANCIAL CRISES AGRICULTURAL PRICES OPEN ECONOMY PRICE ELASTICITY TRADE POLICY PRODUCT UTILITY SUPPLY ELASTICITY PRICING POLICIES COMMODITY PRICE TRADE POLICIES TAXES PRICE INFLATION PRICE CHANGE EXPENDITURE CONSUMPTION OPPORTUNITY COST SUBSTITUTE AGGREGATE SUPPLY WAGES DOMESTIC MARKETS INTERNATIONAL TRADE MARKETING BOARD VOLATILITY MARKET FAILURES FINANCIAL CRISIS VALUE CREDIT PURCHASING POWER DEMAND NATIONAL INCOME UTILITY FUNCTION MARGINAL COSTS INEFFICIENCY FACTOR PRICES INTERMEDIATE GOODS PRICE CHANGES PRODUCTIVE ASSETS EXPENDITURES AGRICULTURE CONSUMERS PRICE FLUCTUATIONS PRICE EFFECT SALE MEASUREMENT SHARES MARKET TRADE LIBERALIZATION INCOME EFFECT ENERGY PRICES MARKET VALUE PRICE INCREASE ECONOMICS TRADE GDP GOODS THEORY SHADOW PRICE COMPARATIVE ANALYSIS MARKET FLUCTUATIONS MARKET EQUILIBRIUM CONSTANT MARGINAL COSTS TRANSACTIONS COSTS SUPPLY PURCHASING COMPETITIVE MARKETS CORN PRICES MARKET POWER PRODUCT MARKETS EQUILIBRIUM PRICES INVESTMENTS MARKET INTEGRATION CONSUMER PRICES PRICE VARIATIONS ARBITRAGE PROFITS LABOR MARKETS PRICE INDEX COMMODITY PRICES COMMERCIAL FARMING ADVERSE EFFECTS INTERNATIONAL MARKETS PRICES DEVELOPMENT POLICY
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World Bank, Washington, DC
Africa | Latin America & Caribbean | Africa | Latin America
2016-03-09T22:51:11Z | 2016-03-09T22:51:11Z | 2016-02

This paper provides an overview of the impact that onetime changes in commodity and other prices have on household welfare. It begins with a collection of stylized facts related to commodities based on household survey data from Latin America and Africa. The data uncovers strong commodity dependence on both continents: households typically allocate a large fraction of their budget to commodities, and they often also depend on commodities to earn their income. This income and expenditure dependency suggests sizable impacts and adjustments following commodity price shocks. The article explores these effects with a review of the relevant literature. The authors study consumption and income responses, labor market responses, and spillovers across sectors. The paper provides evidence on the relative magnitudes of various mechanisms through which commodity prices affect household (and national) welfare in developing economies.

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