Wassiuw, Abdul Rahaman
(2017)
Price change and households’ welfare in Ghana (1991-2013).
PhD thesis, University of Nottingham.
Abstract
Given the growing world population and income in emerging economies, increased demand for food and feed crops for the production of bio-fuels, and greater frequency and intensity of weather-related disasters in different parts of the world due to climate change, global food prices are expected to increase. Food importing developing countries are vulnerable to these price increases and associated price volatility as poor households would be the most severely affected. While there are extensive empirical studies on the effect of food price increases and volatility on household welfare in developed and developing countries, little is known about African countries. This thesis contributes to the literature on Africa, specifically Ghana using three waves of the Ghana Living Standard Survey (GLSS) to measure the effect of food price increases on household welfare between 1991 and 2013 and addressing the effect of price volatility with a measure of households’ willingness to pay for price stability.
A number of contributions are made in this thesis. First, an application of both a parametric and non-parametric analysis to the GLSS shows that budget share equations require including a higher expenditure term to appropriately explain consumer behaviour; the non-linear Quadratic Almost Ideal Demand System expenditure model is the best fit for the GLSS data. Second, an analysis of the consumption patterns of cereal and cereal products shows variation in consumption patterns across time and different groups of households. For example, bread is considered a necessity while maize was a luxury in 1991/92 and 1998/99 but a necessity in 2012/13, showing a case of where a commodity is a luxury at some point and a necessity at another time. Commodity groups such as root, tubers & plantain, meat, fish and oil & fat products are considered luxuries while bread & cereals are considered necessities.
Third, welfare effects calculated for three periods of price changes show there are differences in magnitude for each period, and in all periods a higher proportion of poorer household food expenditure is needed to compensate for observed price increases than for non-poor households. However, within poorer households, we find that rural poor households suffered more from price increases than urban poor households. There are also significant regional differences in welfare effects across periods, with households in the Savannah zone suffering more from observed price changes in all periods. Finally, while the average rural household is a net producer of maize and millet but a net purchaser of rice, rural households are more price risk averse with respect to the price of rice. If substitution between the prices of maize, rice and millet are ignored, 13 per cent of income of the average rural household is required to stabilise prices of all three commodities. However, if substitution is allowed for, the average rural household will be willing to pay 9 per cent of income to stabilise the price of all three commodities at the same time. This suggests that ignoring substitution between prices lead to overestimation of household Willingness-To-Pay (WTP) to stabilise prices of maize, rice and millet in Ghana.
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