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The effect of the US biofuels mandate on poverty in India

Author

Listed:
  • Ujjayant Chakravorty

    (Department of Economics, Tufts University, USA)

  • Marie-Hélène Hubert

    (CREM, UMR CNRS 6211, University of Rennes 1, France)

  • Beyza Ural Marchand

    (University of Alberta, Canada)

Abstract

More than 40% of US grain is now used for energy and this share is expected to rise under the current Renewable Fuels Mandate (RFS). There are no studies of the global distributional consequences of this purely domestic policy. Using micro-level survey data, we trace the effect of the RFS on world food prices and their impact on household level consumption and wage impacts in India. We ?rst develop a par-tial equilibrium model to estimate the effect of the RFS on the price of selected food commodities - rice, wheat, corn, sugar and meat and dairy, which together provide almost 70% of Indian food calories. World prices for these commodities are predicted to rise by 8-16%. Next, we estimate the price pass-through to domestic Indian prices and wage-price elasticities to account for the impact on workers with di?erent skill levels. Poor rural households in India suffer signi?cant consumption losses, which are regressive. However they bene?t from wage increases because most of them are em-ployed in agriculture. Urban households also bear the higher cost of food, but do not see a concomitant rise in wage incomes because only a small fraction of them work in food-related industries. Welfare impacts are greater among urban households. How-ever, more poor people in India live in villages, so poverty impacts there are larger in magnitude. We estimate that the RFS leads to about 26 million new poor: 21 million in rural and ?ve million in the urban population, roughly 10 percent of the estimated number of poor people in India today.

Suggested Citation

  • Ujjayant Chakravorty & Marie-Hélène Hubert & Beyza Ural Marchand, 2016. "The effect of the US biofuels mandate on poverty in India," Economics Working Paper Archive (University of Rennes & University of Caen) 2016-13, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    • Handle: RePEc:tut:cremwp:2016-13
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    More about this item

    Keywords

    Biofuels; Distributional e?ects; Household welfare; Renewable Fuel Stan-dards; Poverty;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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