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Abstract
During the decade from 1982/83 through 1992/93, Bangladesh was able to
increase production of rice, its staple food, at a rate modestly higher than the
growth in population. However, the growth in per capita supply remained
stagnant, because of the substitution of imports with domestic production. On
the other hand, per capita income grew about 2 percent per annum.
Nevertheless, the real price of rice declined about 2.7 percent annually. This
decline in the rice price, on the face of a stagnant supply and increasing
incomes, aroused suspicion whether income distribution has twisted against the
poor who have a higher marginal propensity to consume rice compared to the
rich. Three factors are identified that contributed to the decline in the rice price
while per capita income increased: a) urbanization, b) diversification of diet, and
c) income distribution. The analysis shows that, of a total demand depressing
effect of 15.6 percent, urbanization accounts for 4 percentage points, cross-price
effects for 7 percentage points, and worsening income distribution accounts,
residually, for 4.6 percentage points. These findings are based on plausible
values of demand and supply parameters which warrant fresh evaluation in the
context of rapid structural change in the economy of Bangladesh.