Abstract
The purpose of this paper is to find the impact of food price volatility on the welfare of urban households of Pakistan. Food price volatility in monthly prices of major food commodities for main cities of Pakistan is calculated through standard deviation method. Moreover, the study adopts the methodology provided by Alkire and Foster 2007, and Alkire and Santos 2010 to develop Household Deprived Welfare Index (DWI) for major cities of Pakistan. Following Deaton 1985, the study uses pseudo panel approach. Fixed Effect technique is applied to estimate the impact of volatility on household welfare. The results generated from pseudo panel fixed effect technique depicts that food price volatility has significant and negative impact on household welfare. This study lengthens the literature by identifying the impact of food price volatility on household welfare at city level in Pakistan, using four waves of PSLM/HIES data 2007-08, 2011-12, 2013-14 and 2014-15.This type of micro-level research has not been conducted (nationally or internationally) so far; therefore, it would help the policy makers to implement policies to combat the effect of volatile prices and develop programs for the welfare of severely affected areas.
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