prices, and (b) the monetary cost required to pull out of poverty those households falling below the poverty threshold due to price increases. Thus, we take into account both the change in the depth of poverty, i.e. the increase in the poverty gap given the increase in food prices, and the additional number of urban poor.

Our estimates depend on three country-specific parameters for which we have data of limited comparability: (i) the change in the _domestic_ relative price of food, which varies across countries due to different global prices pass-through to domestic prices; (ii) the share of the total household budget allocated to food consumption by those households below the poverty line or sufficiently close to it to be considered _vulnerable_ to price changes; and (iii), the elasticity of substitution between food and non food items for poor and _vulnerable_ households. Given the uncertainty regarding these three parameters we consider a range of plausible values in our computations, based on information for a subset of countries. On the other hand, there exists reliable and comparable countryspecific information on urban poverty and income distribution that we use to estimate the change in the poverty deficit. The results show a range of estimates of changes in the poverty deficit for each country in our sample; these back-of-the-envelope computations can be refined with additional country-specific information as it becomes available.

We focus exclusively on urban poverty for various reasons. First, from the methodological viewpoint, it is critical to control for the positive income effect that food inflation has on the households which derive their income from agriculture-related activities. Unlike rural households, urban ones only derive a small --if any-- share of their income from agricultural activities. Hence, the assumption that food inflation will only affect the price of their consumption basket, leaving their income unchanged, is not unrealistic. In contrast, rural households derive a substantial part of their income from agricultural activities, and estimation of the net impact of food inflation on rural poverty would require detailed and country specific data which we do not have on a large and comparable basis.<sup>1</sup> Hence, the focus on the urban poor does not mean that rural poverty is not of concern, but rather, it is an unfortunate consequence of the lack of valuable information.

Second, from the policy perspective, it is justifiable to distinguish urban from rural areas, in particular when it is advised to resort on targeted transfer programs to mitigate poverty (World Bank, 2008). Indeed, these programs are, by nature, located in specific places (food-for-work programs, schools to send children) or destined to localizable agents. As such, it is possible to assess the adequacy of current and envisaged transfers in cities in response to the increase in poverty. Third, the inflation information captured by CPIs reflects price changes taking place in the cities rather than in rural areas. Finally, focusing on urban areas—where a welfare loss will unambiguously occur as a consequence of higher food prices—allows us to identify countries at risk of potential social unrest.

> 1 Not only the net buyer/seller position of rural households vis-à-vis each commodity needs to be known (such data are not always available in households surveys; and many developing countries simply do not have sufficiently recent surveys), but also the cost and factors’ market structures to estimate who would benefit the most from food price spikes: farmers, land owners, intermediaries, etc.