sectors (Swinnen 2011). Survey-based evidence also suggested no net deterioration in selfreported food insecurity (Headey 2013; Verpoorten et al. 2013) or poverty (World Bank 2014) during the food price hikes of 2007–2008. Moreover, recent general equilibrium models for India (Jacoby 2013), Uganda (Van Campenhout et al. 2013) and a larger 31-country sample (Ivanic and Martin 2014) all find that higher agricultural prices reduce poverty in the longer run through a combination of agricultural supply and wage responses.

In this paper, we aim to further explore this question by examining the relationship between changes in food prices, agricultural production. and poverty across a large swathe of developing countries. While there is a large and related literature statistically analyzing the drivers of poverty reduction using cross-country data (Christiaensen et al. 2011; De Janvry and Sadoulet 2010; Loayza and Raddatz 2010; Ravallion et al. 2007), and within that literature a handful of papers exploring the links between inflation and poverty reduction (Easterly and Fischer 2000; Ravallion and Datt 2002), the present paper appears to be the first cross-country empirical examination of whether higher food prices help or hinder net poverty reduction. A more empirical examination of this question is important given that simulation models are methodologically somewhat opaque because of their complexity, potentially sensitive to the assumptions and parameters that feed into the model, and silent on how quickly agricultural production and wages might respond to higher prices.<sup>2</sup> Hence, the empirical analysis in the present paper overcomes these deficiencies to some extent and should therefore be seen as a complement to the more structural insights afforded by simulation approaches.

The remainder of this paper is structured as follows. Section II briefly reviews existing theory and evidence on the impact of food prices on poverty and welfare. Section III discusses data and methods. Section IV tests the relationship between changes in food prices and changes in prices (both domestic and international). Section V explores likely explanations of this result, namely, agricultural supply and wage responses to higher food prices. Section VI provides some cautious interpretation of the results.

# II. THEORY AND EVIDENCE TO DATE

The workhorse model of research into food prices and economic welfare has undoubtedly been Deaton’s (1989) net benefit ratio approach. In this partial equilibrium approach, the decisive influence on welfare outcomes is whether a household is a net consumer or net producer of food. Applications of this approach in recent years have almost invariably found that most poor households in developing countries are net consumers of food such that higher food prices are expected to increase poverty in the short run (Ivanic and Martin 2008, 2011, 2014; De Hoyos and Medvedev 2009).

Despite the consistency of this finding across different samples of countries, several critiques have emerged. First, the suitability of household surveys for accurately measuring net benefit ratios is questionable (Headey and Fan 2008, 2010; Carletto 2012). Consumption estimates typically employ short recall modules (typically from one to two weeks) that are then annualized to match up with annual recalls on agricultural production. Yet, recent World Bank research shows that both food consumption and food production estimates suffer from large biases (Beegle et al. 2012;

> 2. Jacoby (2013) conducts both a simulation analysis and an econometric analysis, but his econometric estimates of wage responses to higher food prices cover a five-year period and thus do not shed light on the speed of wage adjustment within that period, which is surely an important welfare concern.

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