The impact of global cotton and wheat prices on rural poverty in Pakistan

Abstract

This paper primarily focuses on the effects of cotton prices on rural poverty in Pakistan. Domestic seed cotton prices are found to move closely with their export values based on world markets since 1990 and declined in real terms by about 20 percent in the late 1990s, taking world price movements and currency depreciation into account. Using household survey data, a 20 percent price increase from the low level in 2000- 01 is found to reduce the rate of poverty among cotton-producing households from 40 percent to 28 percent. In comparison, wheat prices show less decline but a larger proportion of farmers grow wheat.