Part 2 Lectures 5 10 Lecture 5 Slide 16 The Economics of Food The effects of household income on food consumption A rise in household income typically stimulates the demand for food it shifts the demand curve up The effect of income on food demand can be measured by the income inelasticity of demand for food defined as the percentage change in household food consumption due to 1 increase in household income The income elasticity of food demand is typically between 0 and 1 and it tends to decline with the income level While high income tends to stimulate food consumption there is a limit on how much food any individual can eat e g due to limited stomach capacity The proportion of household income spend on food the food budget share tend to decline with income The income elasticity of food demand varies across food items The income elasticity of demand for cereals e g wheat rice is low The income elasticity of demand for meat is higher As income rises households tend to switch their diet toward meat Effects of household income on food consumption Household food expenditure increase with household income Household food budget share decreases with household income As income increases less of that income is spent on food As income decreases more of that income is spent on food Evolution of Food Markets Food demand has been increasing over time in large part due to an increase in population Food supply has also been increasing over time due to increases in cultivated land and technical progress What is the net impact on food markets There are two scenarios The pessimistic scenario the Malthusian scenario where the increase in food demand is faster than the increase in food supply The optimistic scenario where the increase in food supply is faster than the increase in food demand Two Scenarios The pessimistic scenario also called the Malthusian scenario Malthus wrote in 1798 that the power of population is so superior to the power of the earth to produce subsistence for man that premature death must in some shape or another visit the human race Under this scenario there is a limited ability to increase food production on earth implying that the rapid increase in the world population will lead to massive starvation Under the Malthusian scenario food demand would rise faster than food supply and the price of food would rise over time The optimistic scenario There are good prospects to increase food production on earth When the increase in food supply is faster than the increase in food demand providing an adequate diet to a growing world population is not a significant problem Under this scenario the price of food would decline over time Food Prices Over the last century food prices have fluctuate a lot There is a high level of price volatility in the food sector Over the last century real food prices nominal food prices divided by an inflation index have declined significantly This is inconsistent with the Malthusian scenario This means that our ability to increase food production has been good allowing us to meet the challenge of feeding growing population Over the last few years food prices have risen both in nominal terms and in real terms Is this the beginning of a new trend What is coming next How to increase food production Food production agricultural land x yield Over the last centuries the world has seen a large increase in the land area being cultivated and used in agriculture Putting new land into cultivation e g in the US in the nineteenth century expanded food production But over the last twenty years world agricultural land has reached a plateau and is Agricultural yields have increased a lot over the last 50 years although not in no longer increasing Sub Saharan Africa Increasing agricultural yields have become the main way to increase food production The main contributor to increases in agricultural productivity has been technological progress e g due to genetic improvements Read the paper by Fuglie and Wang 2012 Over the last three decades countries like China and Brazil have exhibited large increases in agricultural productivity Summary population There is little historical evidence in support of the Malthusian scenario World food production has been increasing fast enough to feed the growing world Before 1950 a large part of the increase in food production came from increasing the amount of land cultivated and used in agriculture Over the last 60 years a large part of the increase in food production came from Most region in the world have benefits from large increases in agricultural productivity What is going to happen next There is some uncertainty about the future prospects for improving agricultural productivity except for Sub Saharan Africa world food security Lecture 6 Field Research Example Inputs Monitoring and Crowd Out in School Based Health Interventions Evidence from India s Midday Meals Program Motivation Nutritional deficiencies are widespread and have serious consequences e g iron deficiency anemia Micronutrient supplementation and fortification can improve health Government health programs often rely on school infrastructure Motivating question Can school based nutrition programs improve child health Our experiment Does fortifying school meals improve child health Does extra monitoring improve the implementation of school health interventions How do different school based nutrition programs interact School Based Nutrition Programs Advantages Often the most comprehensive infrastructure available Acts as an incentive to attend school Doesn t depend on household individual take up Caveats Sicker and younger children may not attend Implementation often suffers from corruption and other leakages New programs may crowd out existing school activities such as instruction time Existing Research Micronutrient iron supplementation and fortification Efficacy are highly monitored compliance rates 95 Programmatic evaluations compliance rates 50 80 Impact depends a lot on compliance Other delivery mechanisms retail Low take up even with subsidies Amounts appropriate for large scale distribution may not be sufficient to improve Quality of public service delivery health Monitoring Crowd out Background of Programs in India MDM Mid day Meal Program Mandated by the Supreme Court of India in 1995 Each child in school is to receive a hot nutritious meal daily Headmasters are responsible for overseeing meal service Availability and quality of emals varies greatly IFA Iron