AREC 365 Final

Change in Bias

- According to the World Development Report of 2007 - Decline in indirect taxes in sub-Saharan Africa from 28% in the 1980s to 10% in the 2000s - Tax eliminated on essential commodities like sugar and rice and reduced on wheat and maize - Greater policy focus on increasing rural incomes in India and China - Not much increase in government capital formation to increase the productivity of agriculture - Poor people in urban areas more vulnerable?

How does Urban Bias Work

- Taxes on agricultural commodities and land (direct and indirect) - Marketing boards and administered prices - Terms of trade between agricultural and non-agricultural goods favor urban consumers - Poor rural infrastructure (neglect of rural areas by the state) - Higher corruption - Restrictions on movement of goods and people

Washington consensus- Institutions and Economic Growth and land

-Assignment and enforcement of property rights: creates incentives for hard-work and allows for use of property to create more wealth -Regulatory Efficiency: can help solve disputes and protect property -Lack of Corruption: as corruption reduces the incentives for growth and investment increases

Policy Options for Population control

-Giving families monetary incentives to not have many children (India) or undergo sterilization (Bangladesh) -Provision of family-planning advice, technology and materials (contraceptives) reduces fertility

Washington Consensus - concepts, theory and evidence

-Policies for High Economic Growth -Institutions and Economic Growth

Objectives for population control

-Reduce fertility in order to reduce population and food demand -children cause strain on the environment and society

Preconditions for successful policy to reduce fertility

-Successful policy promotes basic understanding that fertility decisions are made by parents -Gives parents an incentive to control fertility -Gives parents access to contraceptive tech

If cost benefit analysis favors investment in tackling undernutrition as a calorie deficit that can be met by a meager amount, why are direct interventions not favored by many?

-Targeting of Interventions: Problems of leakages to non-poor -Allegations of distortions in market prices -Social and class prejudices play a role in determining policy responses

4 parts of the Economists Determinants of a good policy

1 Every action (maybe even inaction) has costs and benefits 2 Declining marginal benefits of adding inputs 3 Economists decision-making rule: marginal costs equal marginal benefits 4 Under certain conditions the invisible hand works in the optimal way

Two Economist concerns with food for all

1 What is the optimal policy for society as a whole? 2 How can the government manipulate human behavior (greed, altruism, sense of fairness etc.) to achieve policy objectives

What isn't distribution

1.) A redistribution of calories consumed by developed countries to developing countries 2.) Reduction in animal protein in developed countries to increase plant/grain based nutrition in developing countries 3.) Reducing overconsumption in developed countries

What are the roles of policies and programs in improving health and immunization?

1.) Combating the Source of the disease 2.) Impeding the Spread of the disease 3.) Promoting Immunization against disease 4.) Promoting Clean Drinking Water 5.) Food Fortification 6.) Direct Medical Intervention to reduce malnutrition: 7.) General Policies to Improve Medical Care:

Approaches to food Policy: Ethical Argument

1.) Concern for the poor: moral, religious and humane response to poverty, hunger and malnutrition vs 2.) Food as a Right: Eighty-five countries have endorsed the International Covenant on Economic, Social and Cultural Rights which defined and formalized the right to food as a basic human right. The dimension of 'justice' added to the discourse around hunger and eliminates the debates over costs and benefit

Relationship between nutrition and health

1.) Disease can cause Malnutrition: Infectious disease increases the potential for and severity of malnutrition 2.)Malnutrition amplifies impact of disease 3.)Immune response is reduced in severe undernutrition

Washington consensus- 3 Policies for high Economic Growth and their outcome

1.) High savings leading to increased capital stock 2.) High labor productivity 3.) Adoption of new technology 4.) Translates to policy prescriptions of - liberalize trade, privatize public enterprise, deregulate prices and reduce inflation etc. Rodrik (2008) 5.) Does the Washington Consensus work - evidence of East Asia vs Africa

Incentives and Behavior (3 goals)

1.) Incentives can be used to achieve desired policy objective - smaller family size, adoption of HYV seeds, reducing environmental degradation etc. Incentives can be assigned only when property rights are assigned properly 2.) Incentives can be used for production - food for distribution etc. depends on the prices that farmers receive 3.) Price Mechanism: can help alleviate scarcity by allocating scarce resources to the most efficient users - fossil fuels use

Income Subsidy farmers

1.) Income support based on landownership 2.) Not based on current cropping decisions 3.) No impact on farm output (good o not-so-good?) 4.) Progressive or regressive subsidy?

What is distribution

1.) Maintaining or increasing overall food production 2.) Reversing underconsumption in developing countries - target vulnerable groups 3.) Increase food entitlements for the poor (in developed and developing countries) 4.) Differentiate between food 'distribution' and income 're-distribution

Current Globalization and economic growth that the IMF and WTO enable

1.) Opening borders to trade by reducing impediments to imports and exports 2.) If they adopt certain macroeconomic policies the IMF will grant them loans 3.) Adopting market-oriented industrial, agricultural and sectoral policies as a condition for obtaining IMF loans 4.) Reducing restrictions of foreign-direct-investment (FDI) 5.) Adopting labor and environmental policies that will attract FDI

Economic Policy Instruments that aid in relief of undernutrition

1.) Policies aimed to raise incomes of the poor: through re-distribution of incomes and greater economic growth 2.) Policies aimed at reducing the price of food: targeting of food prices may create or correct distortions

Roles of increasing income to reduce fertility rates and problems associated with it

1.) Policies that produce economic growth - investment (physical and in human-capital) 2.) Policies that encourage the empowerment of women - education, participation in income generation and household decision-making Issues: It's difficult to change behavior quickly, and impact of contraception use on fertility varies with programmatic and environmental factors - eg. multiple delivery systems for contraception

3 Criticisms of Economist decision making

1.) Prejudices and Economics in Policymaking: Economists have prejudices and opinions that influence their evaluations. 2.) Costs and Benefits: How do we decide the cost or valuation of intangibles like - life, bio-diversity etc. Market valuation based on the 'ability to pay' and 'willingness to pay' 3.) Market Allocations and Distribution of Income: Why is food production, provision of health-care for the poor neglected. Are markets democratic or do the rich call the shots

Cash Transfer

1.) There is little evidence that cash transfers provide disincentives to effort 2.) Cash transfers improves access to health and educational services 3.)Evidence is much weaker that cash transfers improve health and educational outcomes 4.) Nutrition may be an exception: households receiving transfers spend more on food, resulting in significant gains in children's weight and height in several countries

How to impede the spread of the disease

: by interfering with the mechanisms or vectors by which diseases spread. for instance, use of malaria nets, quarantine or travel restrictions etc.

Food Fortification

: through government programs that require commonly purchased foods to contain commonly deficient micronutrients like iodization of salt and fortification of flour with vitamins

Prompting clean drinking water

: through public or community led investment in rainwater-harvesting. According to the WHO and UNICEF(2015) more than 600 million people do not have access to safe drinking water and the bulk of the problem is concentrated in rural areas (530 million people)

Puzzling issue with food in India

According to Basole and Basu (2015) "Although expenditures on food as well as non-food items are a result of household-level decision-making processes, these decisions occur in the larger context of structural changes in the economy such as loss of access to common property resources, increasing in-formalization of the labor market, decline in livelihood options in rural areas, and changes in the supply of social services by the State, all of which can affect expenditures on health-care, education, fuel, transportation, and other services. A food-budget squeeze can arise if rapidly rising expenses on such non-food essentials absorb all the increases in total expenditures and keep real expenditures on food from rising." Even when incomes Increase people still aren't consuming more

India food demand and income paradox and the role of food entitlements

According to Basole and Basu (2015): "Although expenditures on food as well as non-food items are a result of household-level decision-making processes, these decisions occur in the larger context of structural changes in the economy such as loss of access to common property resources, increasing in-formalization of the labor market, decline in livelihood options in rural areas, and changes in the supply of social services by the State, all of which can affect expenditure on health-care, education, fuel, transportation, and other services. A food-budget squeeze can arise if rapidly rising expenses on such non-food essentials absorb all the increases in total expenditures and keep real expenditures on food from rising." Rising incomes in India did not increase expenditure on food because of an increase in non-food expenditure.

How does raising incomes lead to increase food demand according to Dollar and Kraay and Haddad and Alderman

According to Dollar and Kraay (2002) • Economic growth helps the poor even without the trickle down effect • When incomes fall, poor do not get hurt disproportionately (think of the Great Recession of 2008?) • Globalization and good institutions help propel economic growth which in turn helps the poor • Reducing inflation and reducing public spending spurs growth which benefits the poor According to Haddad and Alderman (2000) • Strong relationship between malnutrition and GDP - income growth improved nutritional status • Relying on GDP alone is a slow and inefficient means to attack undernutrition - there is a case for direct intervention

stage 3

As we reach industrialization, birth rate declines... population growth is still positive but slowing

how to combat the source of the disease

Attacking the disease at its source. For instance, universal inoculation for smallpox, measles, polio, rubella among others

Lorenz Curve

Calculates distribution of incomes in a society and compares them to a line of equality

Cash Transfers

Cash transfers lead to greater food consumption • Can lead to diversion of income support from food to other goods • Food transfers increase household caloric intake • Restricts choice • More cumbersome to implement?

2 models for parents decision making

Demographers model, Economic Model

Urban Bias

Developed countries increase food prices and developing countries depress them - Sahn and Stifel(2002) found that in sub-Saharan Africa the quality of life in rural areas lagged behind that in urban areas - Asset poverty - Lower school enrollment - Higher infant mortality Higher incidence of stunting and lower BMI

Evidence and trends that demographic transition occurs

Following are Developed countries where all stages of the transition have occurred: Sweden, England etc. • In developed countries the demographic transition is essentially complete - BR are now just slightly higher than DR • Total fertility rate in developed countries like Japan, Germany, Italy is 1.4 or less -Comparison of population growth rates in developed countries to those in developing countries (Africa 2.43%, Asia 1.08% and Europe 0.14%)

What do food subsidies entail

Giving people food at low prices • Price controls • Public Distribution systems • Subsidies for production and consumption

Ethical Concerns

Incentives, coercion and unintended consequences... 1.) Incentives for reducing fertility but punishment for failing or choosing to not comply 2.) Severe economic and social costs imposed on people - withdrawal of social security, subsidized housing, access to education, monetary fines etc. 3.) Forced abortions and sterilizations 4.) Restrictions on the number of children more severely applied to the poor 5.) Change in the gender balance of societies Examples: One child policy: China Force Sterilizations: India

Subsidies as income support farmers

Income support in response to low-prices or incomes 1.) Similar to disaster payments 2.) Move towards market-based alternatives like crop insurance 3.) Can cause both - movement along and shifts in the supply curve (how?) 4.) Other examples from developing countries - farm loan waivers

demographic dividend

Increase economic growth that may result from a rapid decline in a country's fertility and the subsequent changes in the population age structure

IMF

International Monetary Fund: international organization headquartered in Washington, D.C., consisting of 189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Land Reform

Land Reform - redistributing the ownership of private or public land in order to change the pattern of land distribution and size of holding and changing the rights associated with land -Assistance to victims of natural disasters - can help the poor and create incentives investment 1.) Small farms are more productive 2.) Farmers owning heir land have reasons to make improvements on the land and work harder 3.) Deininger and Squire (1998) show that economic growth was higher in countries that undertook land reform Bad effects: 4.) Land reforms may not be well targeted or well implemented 5.) Coercion and uncertainly have adverse effects on investments and growth

Are these policies efficient?

No, Those policies lead to low wages, poor working conditions and poor environmental quality -IMF requires countries to reduce expenditure on health, education and poverty alleviation programs -Policies imposed by the IMF and WTO are antidemocratic - they countermand decisions made by democratically elected national leaders -The World Bank, IMF and WTO are not democratic - one country one vote

Economic Model

Parents do a costs and benefits analysis of childbearing • Costs of childbearing - education and nutrition • Benefits of childbearing - extra hands to work • Urban vs rural divide • Developed vs developing country divide

Demographers Model

Parents emphasize old-age security • Parents estimate how many children surviving to adulthood will be adequate to take care of them when they become old • Expectations do not change automatically as child mortality rates fall

General Policies to improve medical care

Preventive vs curative care. Emphasis on low-cost delivery of health services to the poor to ensure that they stay healthy

Programs to Increase Human Capital

Raising market income of the poor by raising labor productivity through: 1 Improving education of the poor 2 Providing job training 3 Improving access to health-care

Targeted subsidy

Self-Targeting (self-selection) • Inferior goods: negative income elasticity of demand • Such as - cassava, yams, maize, millet etc. • Only the very poor would use the subsidy so no leakages • Solves the problems of identifying those in real need of food-based assistance • Example: Maize meal subsidies in Zambi for example, the poor - consume different food items than the general population. For instance, in Bangladesh a subsidy on wheat can be self-targeted to the poor, since the poor tend to consume more wheat than the non-poor, who prefer rice

Relationship between inequality, malnutrition and economic growth

Strong relationship between malnutrition and GDP - income growth improved nutritional status

Agricultural Subsidies and the WTO (distortionary vs non-distortionary)

Subsidies distort the level playing field necessary for free trade 1.) Distortionary versus non-distortionary subsidies 2.) Distortionary: subsidy per unit of production which impacts the price mechanism (examples?) 3.) Problem: creates barriers to imports. See Cotton Subsidy dispute between Brazil and the US 4.) non-distortionary: subsidies not linked to the farm-output

Direct subsidies to farmers

Target price-deficiency programs: Fixing a price floor for crops • US: Crops sold in the market and government pays the difference between market and the target price • Zambia: Crops are sold exclusively to the government at the target price • India: Government promises to buy crops at a minimum support price - raises the market price • Impact of these policies on global prices?

Progressive taxation

Taxes that take a greater percentage of income or wealth from the rich than poor are called progressive. According to Tanzi and Zee (2000) • Taxes in developing countries are about half the level of taxes in developed countries • Developing countries use taxes on imports and exports more (declining under WTO rules) • Developing countries impose consumption taxes (indirect or value-added tax) • Progressive taxation can lead to increase in demand - price rises • Employment rises • Poor spend while the rich save

Stage 2

The birth rate remains high and mortality rate declines causing an increase in population (Due to: cleaner food and water, preventative and curable diseases)

Future Age Structure

The population is going to get older as time goes on (pyramid shape)

The distribution of food challenge (wealthy and poor)

The rich consume more so do we require them to consume less? No, redistribution of income is better

The Economic Argument (positive and normative)

Two kinds of economics 1.) Positive Economics: is related to the analysis which is limited to cause and effect relationship. Example - a rise in the price of gas will lead to an increase in people cycling to work 2.) Normative Economics: aims at examining real economic events from the moral and ethical point of view. Example - The price of milk should be $6 a gallon to give dairy farmers a higher living standard and to save the family farm.

Does Malnutrition amplifies the impact of disease? Examples

Yes! Example: Galway et al. (1987) show that severely malnourished children hospitalized for acute respiratory infection were thirteen times more likely to die than children with normal nutritional status in the Philippines • Malnutrition (synergistic with) intestinal diseases caused by worms, protozoa and with bacterial disease Scrimshaw, Taylor and Gordon (1968) • Nutrients important for the immune system - undernutrition can increase the duration of infections like diarrhea

Country experience - Sub-Saharan Africa (Zimbabwe and Zambia

Zimbabwe 1996 Removing government's role in buying from farmers and selling to large private roller mills at a subsidized price Led to the emergence of small-scale mills Increased competition and lowered the price of maize Reduction in government costs and deficits Droughts and elite push back against land reform efforts Led to sharp increase in food prices

Externalities

a decision made in the market by a buyer or seller has benefits that accrue to or costs that are borne by others 1 Externalities present a case of market-failure 2 They can be corrected through government policy 3 Examples - air and water pollution; smoking etc

Gini Coefficient

a measure of economic inequality The higher the number, the higher the inequality A / A + B

How prompting immunization against disease works

by exposing an individual to a small doze of a disease causing agent to induce the development of disease-fighting mechanisms in the body. Examples measles, tetanus, diphtheria, tuberculosis and polio

What is the optimal Policy to reduce undernutrition through cost and benefit analysis....

favors investment in tackling undernutrition as calorie deficit (250 calories per person per day) can be met by investing a meager amount.

Direct Medical Intervention to reduce malnutrition and examples

health policies designed to treat acutely malnourished patients. Examples: -targeted interventions against vitamin A deficiency in Sumatra -Oral rehydration therapy (ORT) in India and Bangladesh -calorie supplements in the UK etc.

Stage 1

high birth rate and death rate (uncontrolled fertility and Population growth rates are close to zero and stay relatively constant over time)

World Trade Organization

intergovernmental organization that is concerned with the regulation of international trade between nations

Progressive Redistribution

land reform, taxes, cash transfer

stage 4

low birth and death rates (population stabilizes EX: life expectancy stable and total fertility rate at replacement levels)

Rationing

purchase of specific amounts of food at prices lower than market prices • Identify people who need subsidized food support - below poverty • Government sets-up a system of distribution or reimbursement of retail outlets selling discounted food • Advantages and disadvantages? • Costs of administration of the scheme

Theory of Demographic Transition

the theory that as a country moves from a subsistence economy to industrialization and increased affluence it undergoes a predictable shift (4 stages) in population growth

does Disease increase potential for malnutrition? examples:

yes!Examples: Malabsorption - digestive system fails to properly digest food and absorb nutrients( caused by liver, pancreas or intestinal diseases) • Gastrointestinal infections - potential nutrition in food consumed is not available due to vomiting and diarrhea • Environmental enteropathy - frequent fecal-oral communication which can occur when toilet facilities are rudimentary, hand washing practices are imperfect and drinking water is drawn from contaminated sources (role of public health services)

Is your Immune response reduced during sever undernutrition?

• Chandra (1988) find that elderly patients who are given nutritional supplements along with flu shots had better flu protection and • Among individuals given a vaccine for protection against tuberculosis - effectiveness of vaccine positively correlated with nutritional status • There is evidence of diminished immune response in moderate undernutrition - particularly in wasted children • Malnutrition interferes with bodily mechanisms that attempt to block he multiplication or progress of infectious agents

food-for-work programs

• Conditional food transfer - people have to work in exchange for food or food-linked income transfer • Solves problems associated with leakages and targeting • Leads to increase in productivity and greater employment in the region (particularly agriculture) • Disproportionate work-load on women

Empirical Evidence of raising income to increase food demand

• Economic growth is possible - Asian Tigers like Taiwan and South Korea increased their per-capita incomes manifold between 1970 2012 • Economic growth is not inevitable - The experience of other countries has been mixed. For instance, per-capita incomes of ten countries declined between 1970 - 2012 (DCR, Zimbabwe etc.) and in eleven countries GDP Per-capita grew by less than 1 percent per year • Per-capita income growth in East Asia (including China) was 5.6% between 1970 - 1990 and 7.5% between 1990 - 2012 UNICEF (2013:tab.7) • Per-capita income growth in South Asia (including India) was 2% between 1970 - 1990 and 4.6% between 1990 - 2012 UNICEF (2013:tab.7) • Correspondingly, in Asia the incidence of undernutrition fell from 41% in 1969 - 71 to 12.3% in 2014 - 16 • In Africa per-capita income growth was much slower (between 0 2.1%) during 1960 - 2012 which resulted in reducing undernutrition from 36% to 23%

The economics of food subsidy (positive)

• Healthy population - particularly vulnerable groups • Increased food production - reduction in food prices (deficit lower) • An example of progressive taxation • Efficiency versus equity

popular rational for food subsidies

• Increased food production - highly productive agriculture • Food subsidies have immediate short-term effect • Donor funded programs are result-oriented • Political stability (by helping the poor or influential groups?)

The economics of food subsidies (negative.)

• Procurement and distribution involves wastage • Food subsidy distorts the market mechanism • There are efficiency loses • Increases government spending - leads to deficit and higher taxes

Direct Distribution

• School lunch programs and soup kitchens • Can benefit vulnerable groups like infants, pregnant and lactating women; and school children • On-site feeding, take-home feeding and nutrition-rehabilitation centers • Can create significant improvements in living standards and food availability

Reasons for low success of direct distribution programs Kennedy et al. 1983: 35-40

• Timing of supplement: last trimester of pregnancy and pre-schoolers below three years most nutritionally vulnerable • Duration: For prenatal women a minimum of 13-15 weeks of participation needed to impact birth weight • Nutritional status of participants: children with second or third-degree undernutrition exhibit greater benefits • Supporting services: like

Food Stamps

• Unlike food distribution or giving income support for buying food • Food stamps have to be bought and can be used to purchase food • Advantages? • Flexibility of varying food-related income transfer to needs and incomes • Cost effective and results in greater food intake