By: Damon Aitken
Empirical Models, Survey Evidence, and their Implications for Food Assistance
Food is crucial for all of us and proper nutrition is essential for a healthy, enjoyable life. However, access to food and good nutrition is especially important for the world’s poor. Food makes up the vast majority (between 60 and 80 percent) of consumption expenditures for the extremely poor (defined as living on less than $1 a day). A commonly referenced topic in health and development economics is the nutrition-based poverty trap, the idea that extremely poor people are trapped in poverty because they cannot access food or essential nutrients. Malnutrition is a severe issue worldwide; 795 million people suffer from chronic malnourishment, according to the UN Food and Agriculture Organization. 780 million of these people live in developing countries. Nearly half of all deaths in children under 5 are due to undernutrition– a total of 3 million per year. Various statistics demonstrate the acute need for adequate nutrition at a young age. Malnutrition stunts growth and hungry children can’t concentrate in school. Cognitive development can be impaired by a lack of access to nutrition, which affects performance in school and future job prospects. Perhaps most importantly, the effects of being hungry as a baby are shown to last into adulthood. It is not simply a question of being hungry but also being able to eat healthy nutrients that have a long-run impact on personal development.
All of this shows that investing in children’s nutrition is necessary to ensure that detrimental effects do not last into adulthood. Viewing health and nutrition as an investment that raises future productivity creates the model (Strauss 1998):
This model conceptualizes health at the current time t as a function of inputs in previous periods N (representing health inputs), L (labor supply), D (public health and disease environment), A (socio-demographic characteristics), B’ (family background), μ (health endowments), and e (measurement error). John Strauss also found in a 1986 paper that the effect of eating more calories on farm labor productivity in Sierra Leone followed an L-shape curve. The effect is greatest at the start but tapers off at higher levels of calorie consumption.
The Engel curve is commonly used in microeconomics to represent household expenditure given household income. In 1857, German statistician Ernst Engel discovered that the proportion of income spent on food decreases as income rises. This observation, now known as Engel’s Law, has been verified empirically ever since– note the similarities between the theoretical graph below on the left and the graph of Indian empirical data on the right. People generally don’t consume drastically more food if their income increases.
As incomes per capita increase, consumption of meat and shrimp rises compared to that of staples such as rice. This certainly seems reasonable. Just because someone has lower income does not mean that they do not want to eat well. The goal is not to maximize caloric consumption; it’s to maximize taste. To this end, studies have shown that the extremely poor don’t necessarily eat more as their incomes go up. They substitute towards better-tasting food.
In order to confirm consumer preferences, randomized control trials (RCTs) have been run. This is an econometric strategy that looks at the difference in means for a group that receives a treatment and a control group that doesn’t receive the treatment. The fact that groups are assigned at random means that selection bias is eliminated. It also allows for estimations of counterfactual totals.
Giffen goods, for which demand increases when the price increases and vice-versa, are a theoretical oddity in microeconomics that are quite rare in real life. An RCT run in the Hunan province of China found evidence of Giffen good behavior with respect to food staples. The staple food, as it is in all of southern China, is rice. When vouchers were randomly distributed to extremely poor households in Hunan, consumption of rice increases when the price of rice increased. Poor consumers who weren’t extremely poor (i.e. they had some purchasing power) consumed more of a staple good when the price of that good increased. Their elasticity of demand depended significantly but nonlinearly on how poor they were.
It seems that poverty traps based on consumption do not necessarily exist, but that more pernicious traps arise due to a lack of micronutrients. Micronutrients include minerals and vitamins– substances that are only required in relatively small quantities but have significant health benefits. Evidence suggests that lacking micronutrients when one is young can hobble them later on in life. A study in Peru showed that a lack of iron in one’s early diet can impair cognitive development. This can be modeled as a permanent negative shock to someone’s lifetime wages. This is not simply a problem in developing nations; the CDC estimates that around half of children between the ages of 6 months and 5 years worldwide suffer from at least one micronutrient deficiency.
One potential way of allowing people to eat healthier is to make food cheaper by increasing its supply. An issue in countries such as Nigeria is that domestic food production is very expensive and inefficient. Agricultural productivity in equatorial African countries has historically been low. Marcella Alsan (2015) found that regions with a historically high concentration of Tsetse flies had lower agricultural productivity today. These flies transmit “sleeping sickness” that is especially deadly for livestock. Having large draft animals boosts productivity and makes large-scale farming possible. Investments in increasing agricultural productivity are necessary in regions such as Sub-Saharan Africa with historically low agricultural productivity. However, though there have been many development aid programs that have sought to improve agricultural productivity, it is still an issue decades later.
With all these concepts in mind, policies intended for improving nutrition must be nuanced in order to be effective. Heterogeneity between individual demands for types of food is just one factor making it difficult to target food aid. When you donate to food aid programs, take care when identifying how they actually serve communities. Simply shipping food from a rich nation to a poor nation can drive local farmers out of business. Sending food by grown by American farmers at cheaper prices due to higher American agricultural productivity is dumping.
When it comes to ensuring that populations receive proper micronutrients, optimism can be found in the fact that nutritional supplements are very cheap. However, consumers often do not find these supplements to be salient to their situation. Good nutrition can be an abstract concept to families struggling to obtain the bare necessities. Health campaigns are shown to have an effect on consumer behavior but the literature is split over whether promotion of a healthy product or demotion of an unhealthy product is the best strategy. Perhaps these two strategies working in tandem could let to better nutritional outcomes on a micro level.
The takeaway, as with numerous issues in development, is that policymakers concerned about nutrition must understand micro-level local contexts. With the advent of big data in emerging economies; smarter policymaking could eradicate hunger and ensure that everyone is on an even playing field from a nutritional standpoint. Fair and equitable access to nutrition is a fundamental right upon which development foundations are built.
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Banerjee, A. V., & Duflo, E. (2012). Poor economics: Barefoot hedge-fund managers, DIY doctors and the surprising truth about life on less than 1 dollar a day. Penguin Books.
D., I., W., P., H., M, J., . . . Philip WJ. (2005). Micronutrient deficiencies and gender: Social and economic costs | The American Journal of Clinical Nutrition | Oxford Academic. Retrieved from https://doi.org/10.1093/ajcn/81.5.1198
Definition and Identification of rural poverty in India. (2017). Retrieved from https://planningtank.com/urbanisation/definition-and-identification-of-rural-poverty-in-india
Food Aid as Dumping. (n.d.). Retrieved from http://www.globalissues.org/article/10/food-aid-as-dumping
International Micronutrient Malnutrition Prevention and Control (IMMPaCt). (2018). Retrieved from https://www.cdc.gov/immpact/micronutrients/index.html
Jensen, R. T., & Miller, N. H. (2008). Giffen Behavior and Subsistence Consumption. American Economic Review, 98(4), 1553-1577. doi:10.1257/aer.98.4.1553
Strauss, J. (1986). Does Better Nutrition Raise Farm Productivity? Retrieved from http://www.jstor.org/stable/1837406