Global market shocks and poverty in Vietnam: the case of rice

Abstract

World food prices have experienced dramatic increases in recent years. These "shocks" affect food importers and exporters alike. Vietnam is a major exporter of rice, and rice is also a key item in domestic production, employment, and consumption. Accordingly, rice price shocks from the world market have general equilibrium impacts and as such, their implications for household welfare are not known ex ante. In this article, we present a framework for understanding the direct and indirect welfare effects of a global market shock of this kind. We quantify transmission of the shock from global indicator prices to domestic markets. Then we use an applied general equilibrium model to simulate the economic effects of the price changes. A recursive mapping to a nationally representative household living standards survey permits us to identify in detail the ceteris paribus effects of the shock on household incomes and welfare. In this analysis, interregional and intersectoral labor market adjustments emerge as key channels transmitting the effects of global price shocks across sectors and among households.JEL classifications: I32, D58, Q17

Constructing Risk: multi-scale change, livelihoods and vulnerability in the Mekong Delta, Vietnam

“…A study of who benefits from high rice prices found that the marginal returns for rice farmers in the delta are declining and that there is a very unfair distribution of profits along the rice value chain, with riceexporting companies (the majority of which are state-owned enterprises) capturing most of the profit from any price rises (Tran Cong Thang et al 2013). Another study found that the price of export rice rose sharply in 2008 but much more than the farm-gate price (Coxhead et al 2012); conversely, farm-gate prices were shown to be much more sensitive to drops in the export price, indicating that risks are more directly transferred to farmers than benefits.…”

World market integration of Vietnamese rice markets during the 2008 food price crisis

“…The only study which investigated price transmission on Vietnamese rice markets during the food price crisis in 2007 and 2008 (Coxhead et al 2012) found lower price transmission from export prices to domestic prices in times of the crisis compared to the period before. However, this study analyzed monthly prices and formed price averages throughout the entire North and South.…”

“…As over 50 % of the population earns less than 2 USD per day, even small price changes have significant welfare implications (Coxhead et al 2012). In recent years, domestic trade has been largely deregulated and placed almost completely in private hands (Tsukada 2011).…”

“…Rice contributes two thirds of the caloric intake of an average Vietnamese household (Coxhead et al 2012), making it the most important staple crop with an average annual per capita consumption of 137 kg (USDA 2013). As over 50 % of the population earns less than 2 USD per day, even small price changes have significant welfare implications (Coxhead et al 2012).…”

Do Vietnamese upland farmers benefit from high world market prices for maize?

“…Thereby, a substantial amount of information contained in short‐run price movements and regional price differences within a country was averaged out and lost for the analysis. Coxhead et al () investigated price transmission in Vietnamese rice markets during the food price crisis in 2007 and 2008. They quantified the transmission of a price shock econometrically and integrated the results in a general equilibrium model to analyze the welfare effects of the developments on international rice markets.…”