Distribution Of Benefits Of Agricultural Price Stability Among Consumers

Several studies have suggested that price stabilization distributes benefits among groups in society. This paper analyzes the distribution of benefits resulting from the stabilization of agricultural prices among consumers of the São Paulo metropolitan region resulting from the 1994 Real Plan. A measure of instability was made of the price series for 19 important agriculture products in food., between 1989 and 1998, to test the effectiveness of the Real Plan in stabilizing prices. To calculate the distribution of benefits of stabilization among consumers stratified according to income level, an estimate was first made of the coefficient of distribution of spending on food. Next, the coefficients of distribution were estimated for a set of nineteen agricultural products important in family diets. The data for family budgets were taken from the IBGE Family Budget Study for 1996, and the price series for agriculture products are from the Institute of Agricultural Economics (Instituto de Economia Agrícola). The results indicate that, in the aggregate, food price stabilization had greater benefits for lower income consumers. However, an individual examination of products suggests that the consumers of higher income strata benefit proportionally more from stabilization of prices of products with a high income-elasticity of demand.