Income Support, Food Subsidies and Nutritional Programs

1
Income Support, Food Subsidies and Nutritional
Programs

• Brinda Viswanathan
• Madras School of Economics
• Chennai (India)

2
Food Assistance Who needs it?

• Those who are
• undernourished due to inadequate intake of
  macronutrients (calories, fats and proteins) -
  Chronically and Acutely Hunger
• malnourished due to inadequate intake of
  micronutrients (vitamins and minerals) - Hidden
  Hunger

3
Food Assistance Why is it needed?

• Hunger (low levels of food intake for long/short
  periods) and or
• food insecurity (uncertainty in access to food)
  may be due to
• Physical
• Economic
• Social
• Physiological

4
Food Assistance Why is it needed?

• Physical
• Reliance upon low productive resources
• Inadequate access to knowledge and technology
• Inability to market the goods at an appropriate
  value
• Land degradation caused by over use or natural
  disasters

5
Food Assistance Why is it needed?

• Economic
• Unaffordable due to poor employment opportunities
  
• Limited access due to poor physical
  infrastructure and ill-functioning markets
• HIV/AIDS pandemic resulting in fewer economically
  active members of the family

6
Food Assistance Why is it needed?

• Social
• Discrimination against some members of the family
  like the female household members or the elderly
• Disadvantaged groups like ethnic/racial
  minorities
• Conflict regions

7
Food Assistance Why is it needed?

• Physiological
• Poor absorption of nutrients by the body due to
  poor
• (local) environmental conditions and
• low health stock

8
Food Assistance Where are the needy?

• Global Spread
• Undernourished in terms of DES is predominantly
  in Sub-Saharan Africa
• Undernourished in terms of nutritional
  (anthropometric) status is predominantly South
  Asia
• Other regions??

9
Food Assistance Where are the needy?

• The undernourished largely in Sub-Saharan Africa
  Map1.jpg
• Child underweight high in both Africa and South
  Asia but worsening in the former and improving in
  the latter Map2.jpg

10
Food Assistance Where are the needy?

• It may not be that regions which have
• better indicators may not have hunger hotspots
• or that they are food secure
• Regional level analysis may indicate
• Large share of food expenditure with low food
  diversity
• Large seasonal fluctuations in food access
• Poor nutritional status of women, children and/or
  elderly

11
Hunger and Food InsecurityWhat do we do?

• Intervention by
• The State
• Or Other Outside Bodies When The State Is
  dysfunctional
• The assistance may be
• Domestic and/or
• International

12
Food Policy Right to food motivation

• As economic and social right of the Directive
  Principles of state policy
• International Declarations and Conventions
• Universal declaration of Human rights
• As a moral and social right
• Independent of directives and declarations

13
Food Policy Public Good Motivation

• All in the society benefit when everybody is well
  fed and nourished
• However, in a competitive economy the negative
  impact on the rich about the poor being
  undernourished will not be taken into account
• Originally by Pauly (1970) and adapted from Innes
  (2002)

14
Food Policy Public Good Motivation

• In principle the government can intervene by
  raising the nutritional well-being of the poor
• The rich reaping from the externalities
• The redistribution policy improves overall
  efficiency

15
Food Policy Public Good Motivation Prior to
Intervention

• In a competitive economy the poor choose their
  food consumption to equate its direct marginal
  monetary value (to themselves) to its price
• Since they do not take into account the
  indirect benefits of their food consumption in
  enhancing the welfare of the rich, they eat less

16
Food Policy Public Good Motivation Prior to
Intervention

• Ip Income
• Xp0Consumption
• ICp0 Indifference Curve

17
Food Policy Public Good Motivation Voucher
Subsidy

• Vouchers are given to the poor for purchase of
  food in the retail market
• The consumer in turn pays a fixed amount of money
  that is lower than the market value of the food
  items
• The consumer
• Either takes it and purchases for the entire
  amount
• Or leaves it
• The govt. compensates the retailer for the
  vouchers

18
Food Policy Public Good Motivation Voucher
Subsidy

• The consumption increases by giving a voucher
  subsidy
• (blue line)
• XVVoucher induced c0nsumption
• S1S2Voucher Subsidy

19
Food Policy Public Good Motivation Price Subsidy

• Budget line is rotated until a tangency is
  obtained between ICP1 and the subsidized budget
  line (green line)
• S1S3Price Subsidy

20
Food Policy Public Good Motivation Income
Transfer

• Max Voucher Subsidy possible is the income
  subsidy
• S1S4Income Subsidy

21
Food Policy What is observed?

• Vouchers cost the least to the government
• Voucher is a targeted subsidy
• identifying the poor is a problem
• The rich may masquerade as poor
• Universal Price Subsidies are a way out when
  enforcement and administrative costs are high

22
Food Policy What is observed?

• Vouchers cost the least to the government
• Voucher is a targeted subsidy
• identifying the poor is a problem
• The rich may masquerade as poor
• Universal Price Subsidies are a way out when
  enforcement and administrative costs are high

23
Food Policy What is observed?

• The poor consumer is indifferent between voucher
  subsidy and price subsidy as long as she is
  captured into the program
• Cash flows are an issue in both instances
• Income transfers reduce the marginal incentive to
  consume adequate food

24
Types of FAPs

• Income Transfer
• Indirect Provision of essential food items at
  subsidized prices
• Direct
• Food stamps (coupons or vouchers) are issued to
  poor households at authorized shops for
  non-subsidized prices
• Conditional Cash Transfer Program participation
  ensures income transfer

25
Types of FAPs

• In kind transfer
• Supplementary Feeding Programs
• Specially target infants, children, elderly,
  pregnant and lactating women
• Either take-home or supervised feeding programs
• Micronutrient fortification
• Food fortified with additional supplements are
  provided through one of these schemes

26
Types of FAPs

• Food for Work Programs
• Able bodied recipients seek and accept employment
  in return for food
• Participants work in labour intensive public work
  programs and hence attracts only those who are
  really needy
• Due to self targeting this is better than
  generalised or targeted food subsidies

27
Types of FAPs

• Food Aid
• Three types of food aid program, project, and
  emergency
• Since 1970 food aid has declined and accounts for
  a very small share of annual flow of food
• SSA(51) followed by Asia (27) in 2004 were the
  major recipients
• US (52) remains the dominant donor followed by
  EU(20)

28
Types of FAPs

• Food Aid
• Effectiveness is debated
• Speed and Flexibility issues in emergency aid
• Challenge of leadership, WTO, global politics,
  GMO disputes etc.

29
Break Time
30
India Public Distribution System

• Each household is allocated a ration card and
  select items (mainly rice or wheat, sugar, and
  kerosene are provided
• A fixed quota is provided through ration shops at
  subsidized issue or ration price
• PDS works alongside a free market

31
India Public Distribution System

• Initially, a price and consumption stabilization
  measure of fluctuation in output
• Later, an anti-poverty measure ensuring income
  transfer through subsidized price and a minimum
  consumption level

32
India Public Distribution System

• The subsidized price of the commodities is an
  implicit subsidy to the household
• The income transfer for a household making all
  purchases of commodity i from the ration shop
  is
• A universal PDS resulted in non-poor taking away
  a large share of subsidy
• Reform since 1997 resulted in targeted PDS

33
India Targeted PDS

• Below poverty line (BPL) households
• entitled a a quota of 10 kg of foodgrains
• at subsidized prices (50 of the economic costs)
• Families above the poverty line (APL) but below
  a certain income threshold
• Received a lower subsidy (90 of the economic
  costs)
• In the post-liberalization framework, this was
  intended to reduce the subsidy burden to the
  government by eventually phasing out the subsidy
  for the APL families

34
Indian TPDS Is it Required?

• Calorie poor are far higher than Consumption poor
• Large variation across states in TPDS usage
• Source Meenakshi and Viswanathan (2006) and Ray
  (2005)

35
Indian TPDS Performance
36
Indian TPDS criticisms

• Huge gap between BPL price and open market price
  results in grain diversion
• Affects welfare as adequate supplies are not
  available to the needy at the right time
• Errors of targeting
• Wrong exclusion (Type I error) leads to welfare
  loss
• Wrong inclusion (Type II error) results in higher
  cost to the government

37
Indian TPDS Performance

• Source Dutta and Ramaswamy (2001)

38
Indian TPDS criticisms

• Due to the alteration from per capita to fixed
  quota irrespective of family size and composition
  has reduced the per person entitlement
• Measurement problem in estimating the poverty
  line
• A large calorie poor population yet not so high
  income poor results in huge targeting errors

39
Indian TPDS Likely Changes?

• Universal targeting in predominantly poor regions
  (lowest possible geographical unit) and targeted
  in others
• Food Stamps in urban areas

40
Food Stamps Basic Features

• A currency allowing to make purchases of
  staples or nutritious food
• Marginal propensity to consume food from food
  stamp income is higher than that from direct
  income transfer
• If the amount transferred is infra-marginal then
  saving would also be spent on consumption
• Budgetary cost to the government and economic
  cost to the society is low

41
Food Stamps Basic Features

• Markets for food need to function well
  (Accessible, competitive)
• May not be price indexed but even if so, not
  insulated from short term fluctuations
• Applies only if a significantly large part of the
  consumption is from market
• Households should have enough resources to
  purchase the coupons at all times of the year

42
Food Stamps Basic Features

• Can be used as an incentive for participation in
  program
• Health
• schooling
• Errors in targeting
• Countries where FSP exists or existed are USA,
  Sri Lanka, Jamaica Honduras, Zambia, Mexico and
  Romania

43
FSP Performance

• Except USA very few countries have had a
  sustained program
• In many developing countries it was introduced to
  reduce fiscal burden as part of SAP
• Very few recent studies on the impact
• The impacts vary across regions

44
FSP Performance in USA

• Started in 1964 with evaluations indicating
• In 1970 reduced poverty but nutritional impacts
  were ambiguous
• Participation rates were lower than the needy due
  to fear of stigma or loss in self-esteem
• In 1995 increased food consumption but less than
  the subsidy- MPC between 0.2-0.45
• In 2003 increase in exit decline in re-entry
  between 1989 and 2000

45
FSP Performance in USA

• Change in eligibility due to
• shift in public policy towards increasing
  employment and temporary assistance programs and
• modification of cash assistance laws
• Lower participation due to better employment
  opportunities and lower poverty rates as the
  economy performed better during this period
• In 2005 FSP participation increases BMI as well
  as the likelihood of being obese
• among low income women but not for men
• resulting in higher health care cost among them

46
FSP Performance in Sri Lanka

• The scheme began by late 1979 replacing the food
  subsidy scheme
• The fiscal burden came down from 6 to 1 of GDP
  by mid 1980s
• Since it was non-price indexed the value of the
  coupon eroded to 43 within 2-3 years
• Leakages in terms of under-reporting of income
  increased beneficiaries manifold over time
• The effect on nutrition was seen on those whose
  income earning capacities improved but there was
  a decline of about 8 per capita in caloric
  intakes for vulnerable sections

47
FSP performance in Jamaica

• In Jamaica the targeted FS was far more effective
  as the targeted groups
• Were pregnant women and lactating mothers and the
  scheme was operational through the health service
  system
• Were school children wherein the malnourished
  children were identified within the school and
  coupons distributed to them
• 57 of the benefits of FS accrued to the bottom
  40 compared to 34 in the general subsidies
• Only 8 of the richest quintile benefited while
  it was 26 in the earlier scheme

48
FSP Performance in Zambia

• In Zambia the program surely reduced subsidy
  burden but was a failure in promoting social
  welfare
• The real value of the coupons eroded due to price
  rice of the maize following SAP
• Short period of registration and infrequent
  revaluation of the registered
• Delays in issuing the coupons
• The shops not having enough stock

49
FSP Performance in India

• In India
• The program was introduced in two states of Tamil
  Nadu and Andhra Pradesh on a pilot basis in early
  2000
• Was denominated in quantities
• Was withdrawn by 2004 in both the states before
  the local/general elections

50
FSP Performance in India

• Coupons issued were for a sufficiently large
  period of time resulting in
• Storing problems
• Cash flow problem prohibited many from purchasing
  it
• Bogus coupons started appearing
• Coupons could only be collected by the household
  head whose photograph was on the identity card

51
Conditional Cash Transfer Program

• Transfer of income to the poor household
  conditional on specific behaviour by the
  beneficiary
• Reduction in poverty thereby improves food
  security
• The program participants may also be covered
  under other intervention schemes
• Increases effectiveness from the
• demand side due to co-responsibility
• supply side due to reduced subsidy burden, lower
  leakages

52
Mexico PROGRESA AND PROCAMPO

• Both are conditional transfer programs
• Cash is first withdrawn temporarily and then
  permanently if the conditions are violated
• Campo was introduced in 1993 to last till 2008
• Gresa was implemented in 1997 in rural areas for
  3 years and now also extended to urban poor

53
Mexico PROGRESA

• Gresa is targeted on women with development in
  human capital as the focus
• Gresa beneficiaries are not eligible for other
  related social security programs but do not
  exclude them from Campo participation

54
Mexico PROGRESA

• Conditioned on
• Households sending their children (3-9 grades)
  to schools regularly
• 85 attendance, with absenteeism monitored though
  health checkups
• Regular visits to health clinics
• Attendance in public health lectures

55
Mexico PROCAMPO

• Campo is targeted on men with focus on improving
  agricultural production
• Conditioned on production on the land registered
  in the program
• Covers 95 of the cultivated area

56
Mexico PROCAMPO

• Payments correspond to the amount of land
  currently under production and not to exceed that
  under initial registration
• Eases out liquidity constraints prior to sowing
  season

57
Mexican GRESA AND CAMPO Performance

• Both programs have similar impact on food
  consumption shares and caloric intakes
• Campo increased consumption through higher home
  production
• Gresa increased consumption through higher
  purchases
• The interaction dummy between Campo and Gresa
  is significant only in the dietary diversity
  equation

58
Mexican GRESA AND CAMPO Performance

• The dietary diversity was higher among the
  CampoGresa households compared to the Campo
  alone households
• This was due to better information on nutrition
  among the former
• Access to retail markets is an important
  criterion for the success of Gresa

59
Supplementary Feeding Programs

• Increases human capital formation
• Education
• Health
• Nutrition
• Improves Productivity
• Preserves livelihoods

60
Supplementary Feeding Programs

• Direct benefit on health and nutrition
• Incentive effects on schooling and health care
• Indirect effect on raising income

61
Types of SFP

• Maternal and child health programs
• Risk of malnourishment
• Economic need
• School feeding programs
• Beneficiary schools
• Age and gender
• Grade

62
SFP Targeting

• Emergency feeding programs
• Saves lives during conflicts, famine, natural
  disaster, migration
• Distribution of general rations
• Supplementary feeding of vulnerable groups

63
School Feeding Programs

• Bangladesh
• In non participating schools the enrollment was
  falling by 2 while in the schools with feeding
  programs the enrollment increased by 20
• Conditional now on school attendance.
• Provides monthly in-kind food transfer
• Enrollment increased 44 for girls and 35 for
  boys

64
School Feeding Programs

• Pakistan
• Five liter tin of vegetable oil to girl students
  who attended school for at least 20 days
• Girl students benefited substantially
• Morocco
• 100kgs of rice and 10 liters of vegetable oil per
  year for good attendance by school girls
• Enrollment moved up from 10 to 30-40

65
School Feeding Programs

• In Jamaica, Kenya, Cameroon, and India (Tamil
  Nadu)
• School enrollment improved
• Dropout rates declined
• Poor children benefited more
• Reduced child labour in some instances
• Girl children benefited substantially

66
India Mid-Day Meals Scheme

• Applicable to school age children
• Mandated provision of hot meals in government
  schools since 2001
• A consequence of a somewhat unique circumstance
  of judicial activism and civil society pressure

67
Indian MDMS Performance

• Self selection into the program as children in
  government and municipal schools are mainly from
  the poor households/regions
• Impacts school enrolment and attendance and
  childs receptiveness

68
Indian MDMS Performance

• Prior to 2001 very few schools had provision so
  limited assessment of the program
• One state,Tamil Nadu has had a history of
  providing noon meals since early 1980s
• Political will has seen that the program
  sustained

69
TN MDMS Performance

• In 1999-2000 43 of children accessing MDMS were
  from TN
• About 44 of poor children were accessing the
  scheme
• Most effective in the 7-12 age groups
• Well targeted among the socially and economically
  disadvantaged

70
TN MDMS Criticism

• Coverage is lower than what it should be
• Quality of food and schooling seem to affect
  participation in some regions
• Beneficiary schools seem to be identified in an
  arbitrary manner
• Some or all of these may change with the new
  judicial mandate

71
India Integrated Child Development Scheme

• A scheme for pre-school children
• To improve nutritional status through an
  integrated programme of providing
• nutrition education,
• supplementary feeding and micronutrient
  supplementation,
• immunisation,
• deworming,
• health/growth monitoring and
• preschool education

72
ICDS Performance

• Very few studies exist on program performance
  despite its long existence
• Poor capture of this program in survey data sets
• States with worse nutrition status among children
  have the lowest c0verage
• No impact on childs nutritional status!

73
TNINP Performance

• Tamil Nadu Integrated Nutrition Program
• sponsored largely by donor funding like World
  bank and SIDA
• Has only rural base
• Based on earlier evaluations for Tamil Nadu at
  the local level
• there seem to have been an impact on stunting and
  underweight
• but other large databases do not indicate a very
  high impact

74
Conclusion

• The required program is context specific either
  for a country or region specific within a country
• Political will to introduce and sustain a program
  is essential
• Leakages are reduced with
• Conditionality
• Better administration
• Community participation