The document discusses the impact of large price increases on welfare and poverty in Bangladesh. It presents a model to examine how changes in expenditures from price increases are related to adult equivalent expenditures and other demographic factors. The results show first round losses in entitlements that vary by household type, and second round changes in consumption and production up to 17% of first round impacts. Higher expenditures had a positive effect, though the impact was quadratic and varied between agricultural and non-agricultural households. While price rises increased poverty gaps, they did not increase overall poverty incidence. Suggestions are made to better capture expenditures and consumption changes, and how people might cope with price increases through substitution.

1. The Impact of large price increase on welfare and poverty in Bangladesh
Syed Abul Hasan
Discussant: Michael Cabalfin
• Model: EV(∆exp. = price ↑)= f(adult eq. exp.) + ZB + u
– Z: demographic, socio-economic
– IV: non-farm income (endogenous?). Exogenous policy?
• Results:
– 1st round: loss in entitlements? Lower for exporters. Net buyer/seller HH?
– 2nd round: change in consumption and production. 9-17% of 1st round.
• How measured? Why offset in importing, intensified in exporting regions? ADL / Impulse
response?
– Positive effect of expenditure. Capturing HH size?
– Quadratic on expenditure (rich ag.HH benefit, low rice for non-ag: separate?),
not on income. Looks cubic, why?
– Price rise increases poverty gap but not incidence. Food poverty?
• Suggestions/Questions:
– Expenditure = Q*P(Rice + Other Food + Other Cons )+ Income +ZB
– How much does rice price rise reduce rice, food consumption?
– How do people cope: substitute rice?