Indira Gandhi Institute of Development Research

IGIDR Seminar: Food, Fuel, and Facts: Distributional Effects of External Shocks
2022-09-21 16:15 - 17:30 (Asia/Kolkata) | Indira Gandhi Institute of Development Research, Mumbai, Maharashtra, 400065, India
Date and Time: 21st September 2022 at 4.15 p.m. (IST)
Speaker: Dr. Gautham Udupa, Research Director at CAFRAL
Venue: Seminar-1
Abstract:-
In this paper we investigate the distributional implications of rising global food and oil prices using rich consumption and income panel data from India. We show that these external price shocks pass-through to domestic prices. We document that consumption inequality rises for the entire horizon of one year following a positive shock to global food and fuel prices. Using a household panel local projection method, we estimate heterogeneous consumption effects along the income distribution. We find robust evidence that lower income deciles are hit harder by rise in food prices, whereas rise in fuel prices hit both the lower and the middle income deciles. For both shocks, however, consumption of top income deciles is largely unscathed. The effects of external price shocks on inequality are quantitatively large and economically meaningful.

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