Distributional Impact of the 2008 Rice Crisis in the Philippines

1. Distributional Impact of the 2008 Rice Crisis in the Philippines George Manzano & Aubren Prado University of Asia & the Pacific Manila, The Philippines UNCTAD Virtual Institute Seminar on Trade and Poverty Geneva, 8-10 September 2014

2. Policymakers • Jerome Bunyi& Maria Araceli Albarece, Permanent Mission of the Philippines to the World Trade Organization • Dr. Segfredo Serrano, Department of Agriculture of the Philippines

3. CONTEXT CONTEXT

4. Context • Rice: most sensitive food item • THE Staple • Major food expense for many households • Many farmers depend on rice farming • … one of the most protected commodities • … with a government office just to regulate trade in rice primarily

5. Context • Philippines has generally been a net importer. Largest importer in 2008. • Self-sufficiency in rice as a most challenging goal • Talks of a no-import stance • Adds to the sensitivity

6. Food Price Spike2007-2008 • Volatile world rice market conditions • Low ending stocks • Export bans by certain countries • ‘Herd’ reaction of importers

7. Context 2008 Rice Crisis World rice market, 1960-2012 Source: Authors’ estimations, based on USDA (2013)

8. Context 2008 Rice Crisis Monthly trends in rice prices, January 2007 – August 2009 Source: Authors’ estimations, based on BAS (2013)

9. CONTEXT OBJECTIVES

10. Objectives of the Study • Determine the distributional impact of the 2008 rice price shock in the Philippines. What are the characteristics of the affected households?

11. Immediate Policy Context • Why are we interested in knowing who are the vulnerable groups to a rice price spike? Efficient targeting

12. Immediate Policy Context • How to make use of the information? • Measures to alleviate suffering • Food: time element is critical • Design for rapid mobilization of aid in the future

13. Broad Policy Context • Response is always a rationing exercise • Resources are always scarce compared to the needs. • Cost-benefit of more permanent solution, crisis prevention

14. CONTEXT METHODOLOGY

15. Methodology • In general, when price of a commodity rises • Producer gains (higher income) • Consumer losses (higher expense) • Extent of benefits and costs varies in degrees • Benefit to household: share of rice income to total income • Cost to household: share of rice expenses to total expenditure

16. Vulnerability Indicator Net Income Share of rice Income Share of Rice Budget Share of Rice -

17. Methodology • Distribution of Benefit/Cost on per capita expenditures • Classify according to household groups • Gender of the HH head • Agricultural vs Non-agricultural • Urban vs Rural

18. Vulnerability of households • Groups that are more vulnerable to shocks in rice prices: • In general, poorer households across groups • Non-agricultural than Agricultural • Urban than Rural • Female-headed than Male-headed

19. Methodology • Simulation • Actual rice price changes • Adjustments for the difference in farm gate and retail prices of rice • Price changes between the pre-crisis phase (January 2007 to February 2008) and the crisis phase (March 2008 and September 2008) • Construction of the Benefits/Costs variable

20. Context 2008 Rice Crisis Monthly trends in rice prices, January 2007 – August 2009 Source: Authors’ estimations, based on BAS (2013)

21. Methodology Constructed a Benefits/Cost Variable (BC) Change in farm gate prices X Rice Income Share Change in retail prices X Budget Share of Rice -

22. Methodology Constructed a Benefits/Cost Variable (BC) BC= [a(rice income share) – rice budget share] x [change in retail price] where a is the ratio of average rates of changes in farm gate and retail prices

23. CONTEXT FINDINGS

24. Characteristics of the Sample All Households: 38,400 Source: Authors’ calculations, based on the 2009 FIES

25. Structure of the Sample Source: Authors’ calculations, based on the 2009 FIES

26. Benefits/costs by gender of household head (controlling for per capita expenditure) Source: Authors’ estimations, based on the 2009 FIES and BAS (2013)

27. Benefits/costs by level of urbanity (controlling for per capita expenditure) Source: Authors’ estimations, based on the 2009 FIES and BAS (2013)

28. Benefits/costs by Agricultural HH indicator (controlling for per capita expenditure) Source: Authors’ estimations, based on the 2009 FIES and BAS (2013)

29. Distributional impact of the 2008 crisis by region

30. CONTEXT CONCLUSIONS AND POLICY RECOMMENDATIONS

31. Conclusions • The effect of a rice price shock is regressive. • Across HH per capita income, those affected more were • Female-headed HHs • Urban HHs • Non-agricultural HHs • Geographical differences in gainers/losers

32. Policy Implications • More efficient targeting exercise for safety net measures • Conditional Cash Transfers • NFA subsidized rice

33. Future Directions Access to better data on rice income per household Effects of rice changes on wages and inflation: second-order effects

34. Thank you! George Manzano & Aubren Prado University of Asia & the Pacific Manila, The Philippines