Component report-Part B-10-Dec-01

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4.7 Effect of a 2.5 percent reduction in transport cost for consumption and production in rural areas, by deciles, as per cent of total household expenditures

Decile(*)
	1	2	3	4	5	6	7	8	9	10	*TOTAL*
Urban
Net Sellers	0	0	0	0	0	0	0	0	0	0	0
Net Buyers	0	0	0	0	0	0	0	0	0	0	0
Total Urban	0	0	0	0	0	0	0	0	0	0	0
Rural
Net Sellers	2.9	2.7	2.6	2.6	2.7	2.6	2.4	2.3	2.0	3.0	2.6
Net Buyers	1.5	1.2	1.4	1.2	1.2	1.0	0.9	0.9	0.8	0.6	1.1
Total Rural	2.0	1.9	2.0	1.9	2.1	1.9	1.8	1.8	1.3	0.8	1.8
Net Sellers	2.8	2.6	2.5	2.5	2.7	2.6	2.3	2.0	1.4	1.5	2.4
Net Buyers	1.4	1.2	1.3	1.1	1.1	1.0	0.8	0.7	0.5	0.2	0.9
Total	1.9	1.8	1.9	1.8	1.9	1.9	1.7	1.5	0.8	0.3	1.6

(*) Deciles by per capita total equivalent consumption. (segmented markets assumption: this effects has an impact only in rural areas)
Source: Model results

For net consumers, the impact is given by:

with

For net producers, the impact is given by:

with

Simulation 3: changes in the price of rice

As pointed out in the Sector Study on Rice, if the quality of rice produced locally is improved, this could reduce the need to import high quality rice and, if transports costs are also reduced, this could result in lower prices of high quality rice in urban areas, which is the principal market for the upper quality rice. In the absence of other efficiency gains, the increased domestic production of high quality rice could result in reduced supply and increased prices of lower quality rice, affecting low income consumers. This simulation provides a assessment of the distribution by per capita consumption decile of the impact of an increase in the price of rice. To keep the simulation simple, it is assumed that the rise in the price of rice of quality m is under no tax and no distortions in the rice market scenario (that is , for w=Srice and Drice). The change in net income is given by:

The sign of the impact on a particular household will be given by sign of

For net rice seller households, the impact will positive, and negative for net rice buyer households. For a poverty analysis, it is important to identify where the negatively affected households are located in terms of per capita consumption. Are all of them poor?

4.8 Effect of a 10 percent increase in the price of rice, by decile, as per cent of total household expenditures, Cambodia

Decile (*)
	1	2	3	4	5	6	7	8	9	10	*TOTAL*
Urban
Net Sellers	1.9	2.8	3.2	3.5	2.9	2.9	1.7	2.2	1.8	5.7	2.5
Net Buyers	-2.2	-1.5	-1.7	-1.5	-1.5	-1.3	-1.2	-1.2	-1.0	-0.6	-1
Total Urban	-1.3	0.5	-0.4	-0.3	-0.5	-0.1	-0.1	0.3	-0.2	-0.3	-0.2
Rural
Net Sellers	2.2	2.6	2.4	2.4	2.9	2.8	2.4	2.3	1.4	1.9	2.4
Net Buyers	-1.9	-1.4	-1.1	-1.2	-1.2	-1.2	-1.2	-1.2	-1.0	-0.7	-1.3
Total Rural	-0.4	0.5	0.7	0.8	1.1	1.0	0.9	1.0	-0.1	-0.5	0.6
Net Sellers	2.2	2.6	2.4	2.5	2.9	2.8	2.4	2.3	1.5	3.8	2.5
Net Buyers	-1.9	-1.4	-1.1	-1.2	-1.2	-1.2	-1.2	-1.2	-1.0	-0.7	-1.2
Total	-0.5	0.5	0.7	0.7	1.0	1.0	0.8	0.9	-0.1	-0.4	0.5

(*) Deciles by per capita total consumption
Source: Model results

This simulation indicates (see table 4.8) that, everything else constant (including the amount of rice consumed by each household), a rise of 10 per cent in the price of rice would increase the income of households that live in the urban area, belong to the first decile and are net sellers of rice, by an average amount equivalent to 1.9 per cent of their total household expenditures. By the same token, for households that live in the urban area, belong to the first decile and are net buyers of rice, the higher price of rice implies a loss of an average amount equivalent to 2.2 per cent of their total household expenditures. The last row of the table indicates that, considering the whole population, those belonging to the first, ninth and tenth deciles are losing due to the price increase (-0.5, -0.1 and –0.4 per cent of total expenditures, respectively), while people in all the other deciles on average win an equivalence to 0.5 and 1 per cent of their total expenditures. On average, as percentage of total expenditures, net sellers gain 2.5 per cent and net buyers lose 1.2 per cent respectively. For the whole country, there is a gain of 0.5 per cent.

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