Chapter 4


applies specifically to households with only a little subsistence production who depend on
the market for their basic supplies of food and other consumer goods in exchange for the
goods they sell. Farmers producing mainly non-tradable food commodities (e.g. vegetables,
roots and tubers, livestock products) are likely to be negatively affected in a double way: by
a nominal income decline from the sale of the goods they produce, and a price increase in the
tradable commodities they need. This may apply particularly to the group of
pastoralists/small-scale livestock farmers, often an important poverty group in those
countries where livestock products are not externally traded.

Subsistence farmers will be little affected by a devaluation in a direct way. They may,
however, be indirectly affected, if the households derive part of their income from wage
labour (see case of unskilled landless below), or if, as the result of a devaluation, cash crop
production is expanded on large land holdings at the cost of the subsistence producers (see
the Philippine case mentioned above).

The impact of a devaluation on the group of unskilled landless will be very area-specific: in
areas with predominant cash-crop production (export products or import substitutes), the
stimulating effect on production will increase employment and income earning possibilities,
while it has adverse effects in areas where mainly non-tradables are produced. The overall
impact on household welfare will, again, be partly offset (or compounded) by real income
effects resulting from price changes. As to the real income effect on wage earners, the form
of payment, wages in kind or in cash, plays an important role; those who receive wages in
kind will be less (positively or negatively) affected by food price changes than those who
receive cash wages. This points to an important issue to consider in decisions on the
appropriate form of payment in public works programmes, being discussed in Module 5.

Remote area dwellers will be little affected by a devaluation, due to their weak market
linkages.

Female headed households who, specifically in urban areas, often derive their income from
informal sector employment and non-tradable services are likely to be adversely affected in
both ways: by a decline of their nominal as well as their real income. Even in rural areas.
female headed households are more likely to be involved in food crop production than
export crop production, reducing the potential gain which they may receive from a
devaluation.


- 134-