| Abstract |
As it is the poor households known to spend over 50% of their budget share on food, which
is a risk of falling back into poverty as a result of food price changes. Thus, this research aims
to determine aside from what factors contributed to food price and non-food price changes across
countries in Latin America; how increases in food price could undermine the progress achieved
in poverty reduction by assessing food and non-food expenditure of low income households of
two lower-income, two upper-middle income and two higher income countries in Latin America.
Using Shapley’s Value Decomposition to evaluate food expenditure to estimate each components
effect (food price, non-food price and income) on aggregate poverty in Bolivia, Chile, Colombia,
Ecuador, Honduras and Uruguay. When food and non-food inflation can influence the level of
purchasing power and therefore each individual household’s economic means (real income) to
acquire the food requirements needed to attain their optimum level of growth. We found that food
and non-food consumption are more inelastic for Honduras and Uruguay, while more elastic for
Ecuador and Chile. In terms of the estimated poverty impact, we found that poverty headcount
rates increased in all the six economies observed, with a varying poverty condition across the
six countries analyzed; the highest poverty headcount ratios have being obtained for Colombia,
followed by Uruguay and Chile. Whereas, the lowest poverty headcount ratios were registered
for Bolivia, Ecuador, and Honduras.
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