Price Trends and Income Inequalities: Will Sub‐Saharan Africa Reduce the Gap?

Abstract

AbstractDuring the past decade, commodities prices have risen substantially and the trend is likely to persist as attested by recent OECD‐FAO projections. The recent debate has not reached a clear consensus on the effects of this trend on poverty and income inequality in LDCs, thus complicating the policy planning process. Our paper aims at analysing the likely welfare and income inequality impacts of food price trends in three sub‐Saharan countries, namely Tanzania, Ghana and Ethiopia. Moreover, we test the statistical significance of changes in income inequalities. Although Tanzania is not affected, we find that price changes tend to exacerbate the income inequalities in Ethiopia and Ghana, especially for specific groups of households. The policy implications are relevant. Finally, our paper underlines the relevance of statistical inference in analysis on income inequalities, to conclude on welfare and inequalities effects of food price movements.