Welfare impacts of food price inflation in Pakistan

The objective of the study was to examine the welfare effects of price changes on food items in Pakistan between two survey data of 2001-02 and 2005-06 which were taken from Household Integrated Economic Survey of Pakistan. The rationale of the study is related with the outsized budget shares of food items including in the consumer basket. Food expenditures are mainly inelastic in naturehowever, the expenditures on non-food commodities can be overdue. The present study focuses on the magnitude of the cost involved in increasing the welfare among various income groups, using equivalent income and equivalent variation method. Moreover, the study analyzes the welfare effects for rural-urban segments of Pakistan. As there are considerable differences in the composition of the consumption basket between rich and poor, therefore, the survey data of both years is disaggregated into four sub-samples according to the expenditure levels of rural-urban segments based on head count index. The results indicate the degree of vulnerability increases among the poorest households when staple food price increases. While in case of meat, this percentage change is low for poorest. It is evident that cereals, pulses and dairy products are the major source of welfare in urban, rural and overall Pakistan