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Small children but big numbers: Estimating the economic benefits of addressing undernutrition

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Harold Alderman
IFPRI-FAO conference, "Accelerating the End of Hunger and Malnutrition"
November 28–30, 2018
Bangkok, Thailand

Published in: Government & Nonprofit
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Small children but big numbers: Estimating the economic benefits of addressing undernutrition

  1. 1. Small Children but Big Numbers Estimating the Economic Benefits of Addressing Undernutrition Harold Alderman IFPRI Nov. 30 2018
  2. 2. Putting Nutrition Goals on the Finance Minister’s Desk The 2015 Sustainable Development Goals (SDGs) call for improvements in all forms of malnutrition, including a 40% reduction in stunting. However, there are 17 SDGs compared to the eight MDGs. And 169 targets (compared to 18 in the MDGs) Prioritization is assisted by analysis of benefits and costs of reaching these targets. Advocacy is enhanced by providing such estimates on a global as well as national scale
  3. 3. The task is not new but the data are Since, at least, 1972 economists have been estimating the contribution of improved nutrition to economic growth With increasing availability of longitudinal studies and controlled trials much more is known on the efficacy of specific interventions But going from these studies to estimates of costs and gains at scale still requires myriad assumptions Explorations, however, indicates that the economic benefits to nutrition are not overly sensitive to the assumptions employed.
  4. 4. Method: Benefit Cost Analysis Advantages: Based on productivity impacts and context specific outcomes and costing data, often at moderate scale. Clear economic interpretation when benefits > costs. Drawbacks: Full calculation of benefits requires either longitudinal data or linking proximate outcomes to additional data such as returns to education. They also require assumptions about the discounted value of future benefits. Moreover, placing mortality reductions into the calculation of benefits requires heroic assumptions Finally: extrapolation from underlying research requires information on how costs change as scale increases. That information is generally not available
  5. 5. Method: Estimates of GNP Loss Due to Undernutrition of Current Population Advantages: Converts easily observed current stunting rates to productivity loss using a best practice estimate of impact of nutrition on schooling and earnings. Can be compared to the current budget for health services. Drawbacks: Does not explore a direct path between specific investments and outcomes. Examples: Horton and Steckel find global GNP loss to be 8% Another study found a loss of between 1.9 and 11.4 percent of GNP for countries in the Caribbean and Central America Similarly, the African Union estimated that Ethiopia lost 16.5% of GNP and Malawi 10.3%
  6. 6. Method: Estimates of Future GNP Loss Due to Neglecting Undernutrition in Today’s Children Advantages and disadvantages similar to estimates based on current stunting As there are fewer individuals under 5 than those in the entire current work force and health has generally improved since the current workforce was in their most vulnerable years, these losses are much lower than those mentioned previously. And as these children will not enter the labor force for years, any estimates of lost productivity require discounting
  7. 7. Method: Aggregate Budgetary Cost of Scaling-Up Nutrition Prominent example: 2013 Lancet estimated that scaling up 10 proven interventions to cover 90% of at-risk children would reduce stunting by 20% and cost $9.6B. The World Bank has updated these estimates arriving at a similar $10B/yr. Advantages: Outcomes can be calculated both in terms of age specific mortality or nutritional status and confidence intervals provided. Costs can be calculated using a region specific ingredient approach. Drawbacks: Underlying software are often based on meta-analyses of efficacy trials with high supervision rates and small samples. It is not clear that these outcomes or costs will match what might be seen if the projects were scaled up.
  8. 8. Going one step further to combine productivity gains and costs at scale This approach models the impact of changes in nutrition using an assumed share of the current cohort of stunted children who will no longer be stunted and an assumption of the value of this improvement in terms of GNP. The larger the GNP per capita the greater the value of improvements. Similarly, the faster GNP is growing, the greater the future value of increased productivity. The World Bank recently estimated the benefit : cost ratio to be 15: 1. Returns were highest in India due to low program costs and high GNP growth rates.
  9. 9. Can we increase confidence in such results? It is a fair question to ask how much any of these estimates are based on favorable assumptions or results from limited data. For example, a global estimate of returns to nutrition by Hoddinott et al. was based on changes in consumption 3 decades after a single RCT in Guatemala. I followed the general direction of Hoddinott et al. to test whether conclusions are robust to the assumptions used in that study. The core results replaced the data from Guatemala with longitudinal evidence of stunting and schooling from Zimbabwe and then link these with estimates on the returns to schooling. I progressively increase estimated costs and/or reduce the expected benefits and showed that under a wide set of assumptions estimated benefits greatly exceed costs.
  10. 10. Core Results for South Asia Economic gains are calculated for the population born between 2015 and 2030 and assume that all individuals enter the workforce at age 20 and continue to work for 40 years. The increment of earnings is based on the labor share of GNP (assumed to be 50%) which, as in Hoddinott et al., is projected to grow at rates reported in World Bank models for the region. The base line stunting rate in South Asia is 35.6%. Gains if current trends in improvement in nutrition continue are $344 billion at a 6% discount rate over the lifetime of this cohort. Base case costs assume that to achieve a reduction in stunting for one child, 5 children receive the package of interventions The B:C ratio is then 26:1 at 6% discount. If investments are accelerated to reach 40 percent stunting reduction by 2030 the benefits would be $497 billion or 18% of 2015 GNI
  11. 11. But the purpose of this study is to explore various alternative assumptions Alternatives explored: ➢Increased costs of schooling (since enrollment increases) ➢Also assumed that as education increase wage premiums would be half of current rates (dropping to 3.5% per year completed) ➢Replaced longitudinal results with global association of height and wages (from Horton and Steckel). All of these are the opposite of cherry picking parameters and all show substantial benefits far greater than cost.
  12. 12. Bottom Line: In all scenarios the Benefits far exceeded the Costs Moreover, these substantial benefits do not include: i) reduced anemia; ii) reduced health costs iii) reduced chronic disease and most important iv) reduced mortality Assumptions are unavoidable for any estimates of the gains from improved nutrition. There are uncertainties about extrapolating estimated impacts derived from a few well-designed trials and the challenge of trying to look forward for a number of decades. However, the uncertainties in the estimates are not substantial from a policy perspective. It is hard to imagine reasonable variations of the assumptions used here that would invalidate the main conclusion that there is significant under-investment in nutrition. There is no logical case that accelerate investments should be delayed because the data have uncertainties.
  13. 13. Further details ➢Alderman, Behrman and Tasneem. Big Numbers about Small Children: Estimating the Economic Benefits of Addressing Undernutrition http://wbro.oxfordjournals.org/content/early/2016/10/01/wbro.lkw003.full.pdf?keytyp e=ref&ijkey=ijnCZI4UQ0ycZkZ ➢Hoddinott et al. The economic rationale for investing in stunting reduction. Maternal and Child Nutrition 9(Suppl. 2): 69–82. https://onlinelibrary.wiley.com/doi/full/10.1111/mcn.12080 ➢Bhutta et al. Evidence-Based Interventions for Improvement of Maternal and Child Nutrition: What Can Be Done and at What Cost?Lancet 382(9890): 452- 477. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(13)60996-4/fulltext
  14. 14. Alderman, Behrman and Tasneem. Big Numbers about Small Children: Estimating the Economic Benefits of Addressing Undernutrition http://wbro.oxfordjournals.org/content/early/2016/10/01/wbro.lkw003. full.pdf?keytype=ref&ijkey=ijnCZI4UQ0ycZkZ Hoddinott et al. The economic rationale for investing in stunting reduction. Maternal and Child Nutrition 9(Suppl. 2): 69–82. https://onlinelibrary.wiley.com/doi/full/10.1111/mcn.12080 Bhutta et al. Evidence-Based Interventions for Improvement of Maternal and Child Nutrition: What Can Be Done and at What Cost?Lancet 382(9890): 452-477. https://www.thelancet.com/journals/lancet/article/PIIS0140- 6736(13)60996-4/fulltext

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