Food for fuel: The effect of the US biofuel mandate on poverty in India

Abstract

More than 40% of US grain is used for energy due to the Renewable Fuel Mandate (RFS). There are no studies of the global distributional consequences of this purely domestic policy. Using micro-level survey data, we trace the effect of the RFS on world food prices and their impact on household level consumption and wage incomes in India. We first develop a partial equilibrium model to estimate the effect of the RFS on the price of selected food commodities-rice, wheat, corn, sugar, and meat and dairy, which together provide almost 70% of Indian food calories. Our model predicts that world prices for these commodities rise by 8-16% due to the RFS. We estimate the price pass-through to domestic Indian prices and the effect of the price shock on household welfare through consumption and wage incomes. Poor rural households suffer significant welfare losses due to higher prices of consumption goods, which are regressive. However, they benefit from a rise in wage incomes, mainly because most of them are employed in agriculture. Urban households also bear the higher cost of food, but do not see a concomitant rise in wages because only a small fraction of them work in food-related industries. Welfare losses are greater among urban households. However, more poor people in India live in villages, so rural poverty impacts are larger in magnitude. We estimate that the mandate leads to about 25 million new poor: 21 million in rural and 4 million in the urban population.

Teaching Leadership Better: A Framework for Developing Contextually-Intelligent Leadership

“…Contexts at different levels differ. For example, a tariff war between the US in India (Chakravorty, Hubert, & Marchand, 2018).…”

On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter?

“…Regression coecients are allowed to change gradually when moving from one group to another: PSTR is a regime-switching 5 Indeed, most of the studies dealing with developing and emerging countries have been concerned with the impact of current and targeted domestic biofuel production on land or agricultural commodities' availability, on water resources required for cultivation and on food prices (see, e.g., Khanna, Onal, Chen, and Huang, 2008;Yang, Xu, Zhang, Hu, Sommerfeld, and Chen, 2011;and Khanna and Crago, 2012). The main exception is Chakravorty, Hubert, and Marchand (2015) who have addressed the impact of US biofuel mandate on poverty in India.…”

Food for Fuel: The Effect of U.S. Biofuel Mandate on Poverty in India

“…Crops are transformed into six final food commodities (rice, wheat, corn, sugar, other food, and meat/dairy) by applying a constant coefficient of transformation. 22 21 Tables A1-A11 are in the Appendix in the Online Supplemental Material (Chakravorty, Hubert, and Marchand (2019)). 22 For rice, wheat, sugar, and "other crops," we assume that one ton of crop produces 0 95 tons of the final food commodity (FAO (2016)), taken to be uniform across regions.…”