Does food inflation exacerbate poverty in the Arab world? Assessing the impact of rural development and institutional quality

The rise in global food prices has significantly exacerbated hunger and poverty, particularly in low – and middle-income countries. While previous studies have explored various aspects of these issues, a critical gap remains in understanding their combined impact within the distinctive socio-economic and political landscape of Arab countries. Therefore, this study examines the joint effects of food inflation, rural development, and institutional quality on poverty levels in the Arab world from 2004 to 2021. Recognizing cross-sectional dependence and heterogeneity among the panels, the study employs advanced panel cointegration methods. The findings from panel-corrected standard errors (PCSE) and feasible generalized least squares (FGLS) analyses consistently indicate that food price inflation exacerbates poverty rates, particularly in low – and middle-income Arab countries, while its impact remains negligible in those with high-incomes. The evidence further confirms that higher income inequality correlates with increased poverty across all income groups. However, economic growth and institutional quality play a crucial role in poverty reduction. Notably, rural development does not significantly contribute to poverty alleviation in low – and middle-income Arab countries. Additionally, the method of moments quantile regression (MMQR) analysis reinforces the robustness of these findings. To mitigate poverty in the Arab world, the study proposes several policy recommendations.