Effects of Rising Food Prices on Poverty and Vulnerability of the Iranian Rural Households

Abstract

This study investigates the effects of rising food price on poverty and rate of vulnerability of the Iranian rural households. Applying the rural households’ data in 2012, first the compensated price elasticities are calculated by a Quadratic Almost Ideal demand system and then the effect of simultaneous increases in world food prices on welfare of rural households is studied in order to compute the vulnerability index and poverty variations. Results show that after rising food prices, the households’ welfare significantly gets worse, so that the corresponding compensated variation equals to 530.78 thousand Iranian Rials, which accounts for 6.28% of mean monthly income of the rural households. This limit defines the vulnerability index. Based on the computed poverty line, i.e. 2772.71 thousand Iranian Rials, over 49% of the households spend less for food. In other words, they suffer from food poverty. The results also show that nearly 14 percent (about 2764 households) has been added to the share of poor households because of rising food prices. The findings of this study can be used to design economic policies in order to protection of vulnerable groups, food security and social welfare.

Keywords

• food imports
• multiple price changes
• welfare
• poverty
• vulnerability
• iran