Part 2: Lectures 5-10Lecture 5 (Slide 16): The Economics of FoodThe effects of household income on food consumption- A rise in household income typically stimulates the demand for food (it shifts the demandcurve up)- The effect of income on food demand can be measured by the income inelasticity ofdemand for food, defined as the percentage change in household food consumption dueto 1% increase in household income- The income elasticity of food demand is typically between 0 and 1, and it tends todecline with the income level- While high income tends to stimulate food consumption, there is a limit on howmuch food any individual can eat (e.g., due to limited stomach capacity)- The proportion of household income spend on food (the “food budget share”) tendto 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 meatEffects 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 foodEvolution of Food Markets- Food demand has been increasing over time (in large part due to an increase inpopulation)- Food supply has also been increasing over time (due to increases in cultivated land andtechnical progress)- What is the net impact on food markets?- There are two scenarios- The pessimistic scenario (the “Malthusian scenario”) where the increase in fooddemand is faster than the increase in food supply- The optimistic scenario, where the increase in food supply is faster than theincrease in food demandTwo Scenarios- The pessimistic scenario, also called the Malthusian scenario:- Malthus wrote in 1798 that “the power of population is so superior to the powerof the earth to produce subsistence for man, that premature death must in someshape 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 massivestarvation- 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 significantproblem- Under this scenario, the price of food would decline over timeFood 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 inflationindex) have declined significantly- This is inconsistent with the Malthusian scenario- This means that our ability to increase food production has been good, allowingus 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 beingcultivated 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 isno longer increasing- Agricultural yields have increased a lot over the last 50 years (although not inSub-Saharan Africa)- Increasing agricultural yields have become the main way to increase foodproduction- The main contributor to increases in agricultural productivity has beentechnological 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 exhibitedlarge increases in agricultural productivitySummary- There is little historical evidence in support of the Malthusian scenario- World food production has been increasing fast enough to feed the growing worldpopulation- Before 1950, a large part of the increase in food production came from increasing theamount of land cultivated and used in agriculture- Over the last 60 years, a large part of the increase in food production came fromimproving agricultural productivity- Most region in the world have benefits from large increases in agricultural productivity,except for Sub-Saharan Africa- What is going to happen next? There is some uncertainty about the future prospects forworld food securityLecture 6: Field Research ExampleInputs, Monitoring, and Crowd-Out in School-Based Health Interventions: Evidence fromIndia’s Midday Meals ProgramMotivation- 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 healthinterventions?- 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 timeExisting 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 improvehealth- Quality of public service delivery- Monitoring- Crowd-outBackground of Programs in India- MDM: Mid-day Meal Program- Mandated by the Supreme Court of India in 1995- Each child in school