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Economics Research International
Volume 2014 (2014), Article ID 581638, 7 pages
http://dx.doi.org/10.1155/2014/581638
Research Article

Evaluation of the 2006–2008 Food Crisis on Household Welfare: The Case of the Sultanate of Oman

1Department of Natural Resource Economics, College of Agricultural and Marine Sciences, Sultan Qaboos University, P.O. Box 34, 123 Muscat, Oman
2Ministry of Commerce and Industry, P.O. Box 550, 100 Muscat, Oman

Received 29 June 2013; Revised 4 December 2013; Accepted 19 December 2013; Published 16 February 2014

Academic Editor: Thomas S. Jayne

Copyright © 2014 Houcine Boughanmi et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The objective of this paper is to evaluate the impact of high food prices during the 2006–2008 food crisis period on the welfare of households in the Sultanate of Oman. The welfare impacts of price changes are estimated using the Hicksian compensating variation (CV) methodology. The compensating variation was estimated for 4 different income household groups as well as two location groups (urban-rural). Results suggest that all household groups suffered welfare losses due to the food crisis. On average, Omani households need to be compensated about 10.3% of their income for the price increase they experienced during the 2006–2008 period. Rural households are more affected than urban households with a required compensation of 12.4% and 9.87%, respectively. In all cases most of the impact is felt on the first round where no consumption adjustment is made; the second round effect is comparatively small compared to the first-order effect. Total compensation required to compensate all households amounts to O.R. 266 M, that is, a 1.14% of GDP, whereas a compensation targeted to the low-income quartile amounts only to O.R. 26.7 M representing 0.1% of GDP.