The Distributive Impact of Terms of Trade Shocks
The halving of oil prices, which happened in a short period between late 2014 and the first months of 2015, has generated major terms of trade losses for oil exporting countries. Even if the oil producing sector normally employs a small group of wo...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/115331490812250507/The-distributive-impact-of-terms-of-trade-shocks http://hdl.handle.net/10986/26357 |
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okr-10986-263572021-06-08T14:42:48Z The Distributive Impact of Terms of Trade Shocks Bussolo, Maurizio Luongo, Patrizia TERMS OF TRADE PRICE SHOCKS REDISTRIBUTION POVERTY INEQUALITY MACRO-MICRO SIMULATION SHARED PROSPERITY OIL PRICES The halving of oil prices, which happened in a short period between late 2014 and the first months of 2015, has generated major terms of trade losses for oil exporting countries. Even if the oil producing sector normally employs a small group of workers and oil export revenues tend to be concentrated in a few firms and in government accounts, these relative price changes have economy-wide effects and significant distributive impacts. This paper describes and quantifies the channels of transmission from the drop in oil prices, to changes in welfare distribution at the household level. Using a macro-micro simulation model, the paper assesses how this shock affects poverty, inequality, and shared prosperity for the case of the Russian Federation. The oil price reduction generates a reverse Dutch disease that impacts sectoral employment, factor returns, and consumption prices. It causes a contraction of employment and wages in more skill-intensive (non-tradable) sectors, and a reduction in consumption prices that is more pronounced for nonfood than for food goods. When these shifts are mapped to changes in incomes at the micro level, all households are affected. Poverty rates could increase by 1 to 4 percentage points, depending on the poverty line used. At the US$10 a day threshold, for example, 4.1 million additional people fall into poverty. Along the consumption distribution, richer people are affected more than those in the bottom 40 percent. However, this minor progressive impact may be reversed due to increases in unemployment and cuts in social programs (transfers). 2017-04-13T17:20:38Z 2017-04-13T17:20:38Z 2017-03 Working Paper http://documents.worldbank.org/curated/en/115331490812250507/The-distributive-impact-of-terms-of-trade-shocks http://hdl.handle.net/10986/26357 English en_US Policy Research Working Paper;No. 8016 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
TERMS OF TRADE PRICE SHOCKS REDISTRIBUTION POVERTY INEQUALITY MACRO-MICRO SIMULATION SHARED PROSPERITY OIL PRICES |
| spellingShingle |
TERMS OF TRADE PRICE SHOCKS REDISTRIBUTION POVERTY INEQUALITY MACRO-MICRO SIMULATION SHARED PROSPERITY OIL PRICES Bussolo, Maurizio Luongo, Patrizia The Distributive Impact of Terms of Trade Shocks |
| relation |
Policy Research Working Paper;No. 8016 |
| description |
The halving of oil prices, which
happened in a short period between late 2014 and the first
months of 2015, has generated major terms of trade losses
for oil exporting countries. Even if the oil producing
sector normally employs a small group of workers and oil
export revenues tend to be concentrated in a few firms and
in government accounts, these relative price changes have
economy-wide effects and significant distributive impacts.
This paper describes and quantifies the channels of
transmission from the drop in oil prices, to changes in
welfare distribution at the household level. Using a
macro-micro simulation model, the paper assesses how this
shock affects poverty, inequality, and shared prosperity for
the case of the Russian Federation. The oil price reduction
generates a reverse Dutch disease that impacts sectoral
employment, factor returns, and consumption prices. It
causes a contraction of employment and wages in more
skill-intensive (non-tradable) sectors, and a reduction in
consumption prices that is more pronounced for nonfood than
for food goods. When these shifts are mapped to changes in
incomes at the micro level, all households are affected.
Poverty rates could increase by 1 to 4 percentage points,
depending on the poverty line used. At the US$10 a day
threshold, for example, 4.1 million additional people fall
into poverty. Along the consumption distribution, richer
people are affected more than those in the bottom 40
percent. However, this minor progressive impact may be
reversed due to increases in unemployment and cuts in social
programs (transfers). |
| format |
Working Paper |
| author |
Bussolo, Maurizio Luongo, Patrizia |
| author_facet |
Bussolo, Maurizio Luongo, Patrizia |
| author_sort |
Bussolo, Maurizio |
| title |
The Distributive Impact of Terms of Trade Shocks |
| title_short |
The Distributive Impact of Terms of Trade Shocks |
| title_full |
The Distributive Impact of Terms of Trade Shocks |
| title_fullStr |
The Distributive Impact of Terms of Trade Shocks |
| title_full_unstemmed |
The Distributive Impact of Terms of Trade Shocks |
| title_sort |
distributive impact of terms of trade shocks |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/115331490812250507/The-distributive-impact-of-terms-of-trade-shocks http://hdl.handle.net/10986/26357 |
| _version_ |
1764461782824386560 |