Was the Global Food Crisis Really a Crisis?


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Was the Global Food Crisis Really a Crisis?

  1. 1. ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE<br />WAS THE GLOBAL FOOD CRISIS REALLY A CRISIS? <br />Simulations versus Self-reporting<br />Derek Headey<br />IFPRI ESSP-II<br />Ethiopian Economic Association Conference<br />July 21, 2011<br />Addis Ababa<br />1<br />
  2. 2. 7/20/2011<br />Acknowledgements <br />John Hoddinott<br />Angus Deaton<br />Maggie McMillan<br />Sangeetha Malaiyandi<br />Yetnayet Begashaw<br />Teferi Mequinante<br />others<br />
  3. 3. 7/20/2011<br />1. Introduction<br />From 2006 to 2008 the international prices of wheat and maize roughly doubled, rice prices tripled<br />Widely assumed that the poor would suffer:<br />The World Bank estimated that as many as 100 million people would be thrown into poverty, subsequently raised to 160 million<br />FAO claimed 75 million were thrown into hunger<br />No IFPRI model, but we also emphasized that the poor would suffer<br />
  4. 4. 7/20/2011<br />1. Introduction<br />But how good is the evidence base for these claims?<br />All of the global evidence thus far is based on simulations of poverty or hunger incidence<br />Part of what comes out of these models is what goes in; other flaws too<br />This paper takes a different track by assessing self-reported food insecurity from the Gallup World Poll (GWP)<br />
  5. 5. 7/20/2011<br />2. Brief critique of simulation studies <br />2 types: FAO/USDA hunger and WB poverty estimates<br />Hunger estimates deeply flawed<br />Extremely difficult to measure calorie intake<br />Extremely difficult to measure calorie requirements<br />No means of gauging access shocks, because there are no prices or incomes (e.g. Asian financial crisis)<br />In fact, FAO has relied on USDA estimates, not its own<br />Conceptually flawed: with rising prices, people may cut back on quality not quantity; and micronutrients matter<br />
  6. 6. 7/20/2011<br />2. Overview of simulation studies <br />USDA model estimates impacts of higher prices on calorie availability based on reduced imports<br />This has problems but 2 main problems are:<br />USDA omits China, Mexico, Brazil – big countries<br />USDA estimates are contradicted by their own historical data: cereal consumption did not go down in any region over 2007/08, except wheat consumption in Africa<br />So calorie approach is very flawed for looking at impact of shocks; widely reported FAO numbers not credible<br />
  7. 7. 2. Overview of simulation studies <br />World Bank poverty simulations better<br />Measure net benefit ratios (whether HHS are net food consumers or producers) so price changes easy to model<br />But sample sizes are weak (China always excluded) and there are significant doubts about the shock imposed on the model: only food prices rise, not nonfood commodities, not fuel, and not incomes.<br />The latter is a big issue: incomes in developing world have been growing strongly (cited as cause of crisis!)<br />
  8. 8. 3. Gallup World Poll (in brief)<br />Since 2005/06 GWP has interviewed HHs in around 150 countries using randomly selected, nationally representative samples<br />Surveys are smaller than LSMS, but margins of error around 3.3 percentage points (though possibly more for specific questions)<br />No major sampling biases reported, though some oversampling in 3 Chinese provinces, which Gallup claims to have made adjustments for<br />
  9. 9. 7/20/2011<br />3. Gallup World Poll (in brief)<br />“Have there had been times in the past 12 months when you did not have enough money to buy the food that you or your family needed? Yes/No?” [food insecurity]<br />Potential problems:<br />No common definition of food<br />Standard biases: fear, pride, media coverage<br />Sensitivity to question ordering. In China in 2006 food affordability question followed income question. Did this prime respondents to answer “yes” more often?<br />
  10. 10. 3. Are trends in self-reported indicators plausible?<br />In the paper I look at cross-section patterns, and I show strong correlations with other indicators, as well as some potential problem countries<br />Yet my main interest is not levels, but trends. Indicators could be biased in levels and still be unbiased in trends.<br />To test validity of self-reported food insecurity, I regress changes in this measure against changes in food CPI and percentage changes in GDP per capita (i.e. disposable income) using a panel of countries<br />
  11. 11. 4. Are trends in self-reported indicators plausible?<br />Note:<br />I use monthly food CPI data, which matches recorded month of GWP survey. <br />I only have yearly GDP data, so match is imperfect<br />I interact growth and food inflation with levels of income for obvious reasons<br />Panel dataset is unbalanced cross-sectionally and survey timings are also different<br />
  12. 12. Table 5.2—Are changes in self-reported food insecurity explained by economic growth and food inflation?<br />
  13. 13. 7/20/2011<br />4. Are trends in self-reported indicators plausible?<br />So both economic growth and food inflation have expected signs & strong marginal impacts<br />Strong impact of growth is particularly important – elasticity is as strong here as it is in poverty & growth literature – but impacts conditional on income levels<br />Recall that rising incomes don’t feature in any simulation analysis scenarios<br />Caveat is that with fixed effects excluded, R-squared is quite low (0.10), so other things are driving self-reported food insecurity, and measurement error may be sizeable<br />
  14. 14. 5. Trends in self-reported food insecurity<br />Given some validation from the regression results, it seems that trends in GWP data may impart some useful information<br />I focus on 70 LDCs - 70% of developing world population – and look at changes between a pre-crisis (2005/06), a food crisis (2007/08), and an early financial crisis wave (2008/09). <br />Note that 2007/2008 refers to surveys conducted in 2008, but asking questions about previous 12 months (etc.)<br />I also run a range of sensitivity analyses relating to China/India, omitted countries and using predicted changes rather than actual changes (like instrumental variables)<br />
  15. 15. Table 14. Alternative estimates of the global food insecurity trends (millions of people): 2005/06 to 2007/08<br />
  16. 16. 7/20/2011<br />5. Trends in self-reported food insecurity<br />So self-reported food insecurity went down by a huge number under almost any assumption about errors<br />What explains this? In a nutshell, it appears to be because of strong economic growth and very limited food inflation in big countries: China, India, Indonesia, etc<br />Note that econometric results suggest that food inflation did increase poverty, but only if incomes are held constant (same as WB poverty simulations)<br />Also note that GWP food insecurity did rise in Africa<br />
  17. 17. Figure 8. Rapid economic growth and limited food inflation in most large countries: 2005/06 to 2007/08<br />
  18. 18. Table 13. Estimating changes in self-reported food insecurity by backcasting and forecasting<br />
  19. 19. 7/20/2011<br /> 7. Conclusions<br />Self-reported data come with caveats so we need to be very careful: we still don’t know the true impacts of the “crisis”<br />But GWP certainly shed light on the potential importance of rising incomes, and certainly cast doubt on simulation results<br />FAO should consider abandoning calorie approach<br />WB should consider modeling income changes as well as food price changes<br />Both institutions and others should think about how we can improve measurement of food insecurity<br />Food consumption scores and anthropometric measures arguably get closer to what we really mean by food insecurity<br />
  20. 20. Table 9. Trends in self-reported food insecurity prevalence in <br />The developing world: weighted and unweighted means<br />Table 10. Estimated trends in the numbers of food insecure people (millions) in 58 developing countries<br />
  21. 21. Table 11. Regional trends (unweighted) in self-reported food insecurity (% prevalence).<br />
  22. 22. Figure 7. Self-reported food insecurity trends in the most populous developing countries<br />