Price shocks and public attitudes: Evidence from Uganda

Organised by

• Robert Schuman Centre for Advanced Studies
• GGP: Global Governance Programme

Using a natural experiment of exchange rate liberalization in Uganda, Kasper Vrolijk offers causal evidence on the link between price shocks and public attitudes. The event raised economic growth through relative price reductions in exports, but simultaneous led to a reduction in relative purchasing power for consumers and producers in respect to imports. This coincided with people believing trade to raise wages and create jobs, while also that trade increases domestic prices. Vrolijk combines a rich set of microdata on the universe of formal workers and firms in Uganda with detailed microdata on formal and informal households and individual-level public attitudes. Using a Bartik-type strategy, he constructs granular exposure measures to price shocks for firms, workers and household, and shows how exposure to exogenous price shocks enhances participation and has ambiguous effects on identity. Effects occur mainly through the cost-of-living of households, firms participating in importing, and through local production networks.