Abstract

The study analyses the transmission of food price shocks to households in Zimbabwe. Studies examining the impact of food price shocks on households, especially in Africa, during the recent global food crisis look at the magnitude and incidence of the impact on either poverty prevalence or cost of living without attempting to decomposem impact multipliers into transmission paths for the shocks. The study fills this gap. The study uses a SAM price model based on the 1991 Zimbabwe SAM. Block and path decomposition techniques used in the study clearly identify the paths, magnitude, and incidence of food price shocks to households. The study finds that food price shocks are generally regressive and that cost of living increases by more in rural than in urban areas and for lower income than for higher income households following a shock. The findings of the study substantiate Bennett’s and Engel’s laws. Of all household groups, smallholder households have the largest cost of living elasticities and that particularly with respect to their own-production cost shocks. Food processors have the greatest transmission effects on cost of living – inducing between 24 percent and 30 percent increase– especially in light of the increasing degree of urbanity in Zimbabwe. The study recommends policies that foster macroeconomic stability and strengthen smallholder production through input subsidies and agricultural technology transfer. A policy strengthening industrial food processing through a resuscitation fund is highly recommended. Facilitating gainful and stable employment for the low income urban group would doubtlessly be a double-edged sword on both urban and rural food poverty. Lastly, when it comes to seemingly protracted food poverty traps because of price shocks, widening and deepening social safety nets is beneficial. Cash and food transfers, and public works programs are gainful.

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School	: School of Law, Economics and Government
Issued Date	: 2011

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