1 Impacts of rising food prices on poverty and welfare in Vietnam

This paper examines the impacts of rising food prices on poverty and welfare in Vietnam. Increases in prices of food raise the real incomes of those selling food, but make net food purchasers worse off. Overall, the net impacts on an average Vietnamese household’s welfare are positive. However, the benefits and costs are not spread evenly across the population. A majority of the population would be worse-off from increases in food prices. A uniform increase in both food consumer and producer prices would make 56 percent of households be worse off. Similarly, a uniform increase in the price of rice would reduce the welfare of about 54 percent of rural households and about 92 percent of urban households. The reason why average household welfare increases is that the average welfare losses of the households whose welfare declines (net consumers) are smaller than the average welfare gains of the households that benefit (net producers). With relative small change in food price, the poverty rate declines slightly because poorer households in Vietnam tend to be net producers. However, if price increase is large, for example at 50 percent, poverty rates may increase.