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Welfare impact of asymmetric price transmission on rice consumers in Bangladesh

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  • Mohammad Chhiddikur Rahman
  • Valerien O. Pede
  • Jean Balié

Abstract

This study investigates asymmetric price transmission (APT) in the rice market in Bangladesh using monthly price series at farm, wholesale, and retail levels from October 2005 to June 2017 in a nonlinear autoregressive distributed lag model (NARDL). The results indicate a significant asymmetric relationship across price at retail, wholesale, and farm levels in the long and short term. While wholesalers/millers benefit from the imperfect price transmission at the expense of farmers, retailers gain over wholesalers/millers. We find that the consumer surplus decreases from a price rise at the wholesale or farm level, but consumers do not enjoy a proportional increase in their surplus from a price reduction. The study reveals that the consumer welfare loss due to APT along the rice value chain of Bangladesh is equivalent to US$89.05 million per month. This estimated aggregate welfare loss requires both the attention of decision‐makers and corrective actions.

Suggested Citation

  • Mohammad Chhiddikur Rahman & Valerien O. Pede & Jean Balié, 2022. "Welfare impact of asymmetric price transmission on rice consumers in Bangladesh," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1600-1617, August.
    • Handle: RePEc:bla:rdevec:v:26:y:2022:i:3:p:1600-1617
    DOI: 10.1111/rode.12882
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    1. Islam, Md Saiful & Rahman, Mohammad Chhiddikur & Haque, Md Enamul & Rahaman, Md Shajedur & Omar, Md Imran & Sarkar, Md A R & Islam, Mohammad A, 2023. "Cultivation of Local Rice Varieties in Bangladesh: Assessing the Farm Level Determinants," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 21(1), pages 46-56.
    2. Mohammad Chhiddikur Rahman & Md Shajedur Rahaman & Jatish C. Biswas & Niaz Md. Farhat Rahman & Mohammad Ariful Islam & Md Abdur Rouf Sarkar & Md Saiful Islam & Md Maniruzzaman, 2023. "Climate change and risk scenario in Bangladesh," Asia-Pacific Journal of Regional Science, Springer, vol. 7(2), pages 381-404, June.
    3. Md Shajedur Rahaman & Mohammad Chhiddikur Rahman & Md Abdur Rouf Sarkar & Mohammad Ariful Islam, 2023. "Contribution of agriculture subsectors on economic growth in Bangladesh: An application of the ARDL method," Economics Bulletin, AccessEcon, vol. 43(1), pages 245-264.

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