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When do relative prices matter for measuring income inequality? The case of food prices in Mozambique

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  • Channing Arndt
  • Sam Jones
  • Vincenzo Salvucci

Abstract

Changes in relative prices of commodities consumed in different shares across income groups can be expected to alter real income differentials between these groups. Using Mozambican household budget survey and price data from 2002/03 and 2008/09, we show that once relative price increases are accounted for, inequality of real consumption increases substantially. We obtain this result by constructing a price deflator that reflects divergent price dynamics of different product categories. Since the main factors driving this result prevail in other developing countries, it is likely that inequality may be underestimated elsewhere. Copyright Springer Science+Business Media New York 2015

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  • Channing Arndt & Sam Jones & Vincenzo Salvucci, 2015. "When do relative prices matter for measuring income inequality? The case of food prices in Mozambique," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 449-464, September.
    • Handle: RePEc:kap:jecinq:v:13:y:2015:i:3:p:449-464
    DOI: 10.1007/s10888-015-9303-5
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    3. Channing Arndt & Lionel Demery & Andy McKay & Finn Tarp, 2015. "Growth and Poverty Reduction in Tanzania," WIDER Working Paper Series wp-2015-051, World Institute for Development Economic Research (UNU-WIDER).
    4. Cornia Giovanni Andrea, 2018. "Eradicating Poverty by the Year 2030: Implications for Income Inequality, Population Policies, Food Prices (and Faster Growth?)," Journal of Globalization and Development, De Gruyter, vol. 9(2), pages 1-21, December.
    5. Rodriguez Castelan,Carlos & Lopez-Calva,Luis-Felipe & Lustig,Nora & Valderrama,Daniel, 2016. "Understanding the dynamics of labor income inequality in Latin America," Policy Research Working Paper Series 7795, The World Bank.
    6. Helen Barnes & Vanda Castelo & Finório Castigo & Antonio S. Cruz & Michell Mpike & Michael Noble & Gemma Wright, 2016. "Tax-benefit microsimulation modelling in Mozambique: A feasibility study," WIDER Working Paper Series 027, World Institute for Development Economic Research (UNU-WIDER).
    7. Gürer Eren & Weichenrieder Alfons, 2020. "Pro-rich inflation in Europe: Implications for the measurement of inequality," German Economic Review, De Gruyter, vol. 21(1), pages 107-138, April.
    8. Vollmer, Frank & Zorrilla-Miras, Pedro & Baumert, Sophia & Luz, Ana Catarina & Woollen, Emily & Grundy, Isla & Artur, Luis & Ribeiro, Natasha & Mahamane, Mansour & Patenaude, Genevieve, 2017. "Charcoal income as a means to a valuable end: Scope and limitations of income from rural charcoal production to alleviate acute multidimensional poverty in Mabalane district, southern Mozambique," World Development Perspectives, Elsevier, vol. 7, pages 43-60.
    9. Channing Arndt & Kristi Mahrt, 2017. "Is inequality underestimated in Mozambique? Accounting for underreported consumption," WIDER Working Paper Series 153, World Institute for Development Economic Research (UNU-WIDER).
    10. Arne Bigsten, 2018. "Determinants of the Evolution of Inequality in Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 27(1), pages 127-148.
    11. Ulrik Beck, 2015. "Keep it real: Measuring real inequality using survey data from developing countries," WIDER Working Paper Series 133, World Institute for Development Economic Research (UNU-WIDER).
    12. Eren Gürer & Alfons J. Weichenrieder, 2021. "Pro-rich Inflation and Optimal Income Taxation," Public Finance Review, , vol. 49(6), pages 815-844, November.
    13. Helen Barnes & Vanda Castelo & Finório Castigo & António S. Cruz & Michell Mpike & Michael Noble & Gemma Wright, 2016. "Tax-benefit microsimulation modelling in Mozambique: A feasibility study," WIDER Working Paper Series wp-2016-27, World Institute for Development Economic Research (UNU-WIDER).
    14. Eva-Maria Egger & Michael Keller & Jorge Mouco, 2021. "The socioeconomic impact of coal mining in Mozambique," WIDER Working Paper Series wp-2021-108, World Institute for Development Economic Research (UNU-WIDER).
    15. Carlos Gradín & Finn Tarp, 2019. "Investigating Growing Inequality in Mozambique," South African Journal of Economics, Economic Society of South Africa, vol. 87(2), pages 110-138, June.
    16. Baez Ramirez,Javier Eduardo & Inan,Osman Kaan & Nebiler,Metin, 2021. "Getting Real ? The Uneven Burden of Inflation across Households in Turkey," Policy Research Working Paper Series 9869, The World Bank.
    17. Arndt, Channing & Hussain, M. Azhar & Salvucci, Vincenzo & Østerdal, Lars Peter, 2016. "Effects of food price shocks on child malnutrition: The Mozambican experience 2008/2009," Economics & Human Biology, Elsevier, vol. 22(C), pages 1-13.
    18. Alfons J. Weichenrieder & Eren Gürer, 2020. "Inflation, Inflationsmessung und Zentralbankpolitik," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 100(11), pages 834-838, November.
    19. Carlos Gradín & Finn Tarp, 2019. "Investigating Growing Inequality in Mozambique," South African Journal of Economics, Economic Society of South Africa, vol. 87(2), pages 110-138, June.
    20. Ulrik Beck, 2015. "Keep it real: Measuring real inequality using survey data from developing countries," WIDER Working Paper Series wp-2015-133, World Institute for Development Economic Research (UNU-WIDER).
    21. Channing Arndt & Lionel Demery & Andrew McKay & Finn Tarp, 2015. "Growth and poverty reduction in Tanzania," WIDER Working Paper Series 051, World Institute for Development Economic Research (UNU-WIDER).
    22. Sam Jones & Finn Tarp, 2015. "Understanding Mozambique's growth experience through an employment lens," WIDER Working Paper Series wp-2015-109, World Institute for Development Economic Research (UNU-WIDER).
    23. Channing Arndt & Kristi Mahrt, 2017. "Is inequality underestimated in Mozambique?: Accounting for underreported consumption," WIDER Working Paper Series wp-2017-153, World Institute for Development Economic Research (UNU-WIDER).
    24. Hoi Wai Jackie Cheng, 2020. "Economic properties of data and the monopolistic tendencies of data economy: policies to limit an Orwellian possibility," Working Papers 164, United Nations, Department of Economics and Social Affairs.

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