Research Notes: commodity prices and impacts on Africa

SSRN’s email system delivered this week into my inbox a set of abstracts from the World Bank Policy Research Working Paper Series.  This collection (all published in October 2008) speaks specifically to the potential impact of commodity price changes on African countries. These are critical issues for most African countries which are heavily dependent on the trade in commodities. But as a recent paper (2009) by Jacks, O’Rourke and Williamson highlights, commodity price volatility has not increased over time (they go back to the 1700s) and may even decrease with “world market integration”.

All of the SSRN papers are part of a larger program at the World Bank:

World Bank’s Development Dialogue on Values and Ethics: Africa Food and Oil Price Crises

One paper by Wodon et al. is central to the overall project and finds that not only may poverty rates increase in much of Africa, but that those who are already poor may find themselves even worse off than they already are. Another study by Parra and Wodon was even more pessimistic about the prospects for Ghana when looking at the potential multiplier effects of high energy prices.  Of course, energy prices have fallen quite a bit since they conducted their study. But their study surprisingly resembles another one conducted by Arndt et al. in Mozambique and which appeared in the journal of Agricultural Economics last year.

Generally, the findings are not that surprising and they echo other recent research (such as that by their colleagues Ivanic and Martin). However, that consensus is not unchallenged. See, for instance, Aksoy and Isik-Dikmelik.

One minor problem I have is their claim that we can generalize from their West and Central Africa findings to conclude that Africa “as a whole” could have 30 million more poor people with a 50 percent increase in “selected food prices”.  Even within their sub-regions variance was relatively high (a 1.8% increase in Ghana’s poverty headcount versus a 9.6% increase in Senegal).

Overall, the work of this group is a valuable empirical addition to our understanding of the links between commodity prices and poverty.

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