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TABLE 19. Treasury costs of increasing calorie consumption per person per day, in 1978 pesos

CONCLUDING REMARKS

Policy Implications

This article has attempted to evaluate the nutritional effects of food price and income policies and to rank target-group oriented policies according to cost-effectiveness. Its primary emphasis was on an income-stratum-specific analysis of nutritional impact, giving priority to increasing nutrient consumption by low-income groups. The results of the analysis indicated the following issues to be of particular significance to agricultural, food, and nutrition policymakers.

First, income-stratum-specific analysis is essential to an understanding of the distributional effects of food policies. The general tendency in agricultural ministries is to concentrate on increasing aggregate food supply or agricultural production. However, unless these policies increase the incomes of nutritionally vulnerable groups, or unless productivity increases reduce the price of a staple food consumed by low-income households, increasing agricultural production does not imply improvement in the nutritional status of at-risk groups. While debates continue concerning which commodity to subsidize or which forms of income transfers most effectively minimize non-food leakages, the basic issue is to raise the real incomes of poverty groups so that they are able to meet their food needs as well as other basic needs. In evaluating agricultural policies, therefore, one must ask whether the policy will raise the real incomes of the poor, and whether it will not have adverse effects on nutrition.

Second, a consideration of the nutritional benefits and the costs of nutrition intervention programmes is necessary, given limited fiscal resources. The benefits of target-group oriented policies must be compared with the administrative cost involved: while precise targeting minimizes leakages to nutritionally sufficient households, it may entail administrative costs that increase the total cost of the programme. Other innovative approaches to targeting besides means tests deserve further study, for example geographical targeting or subsidies on nutritionally desirable but low-status commodities. Policy-makers must, of course, remember the political economy within which they operate, for the relative attractiveness of nutrition intervention programmes depends not only on the nature of the problems but also on the relative importance of such criteria as costs, political viability, and speed of implementation [7]. Nutrition advocacy by government institutions that affect nutrition directly or indirectly is, therefore, imperative.

Third, the powerful influence of food prices reiterates the need to formulate food price policy carefully so as to reconcile conflicting objectives. It is difficult both to pursue the objective of long-run efficiency in resource allocation and to meet the short-run need to alleviate the hunger problem with a single policy instrument. The success of food policy depends to a great extent on: understanding the political economy of food prices, developing more specific tools for managing a country's border price through buffer stocks, and achieving greater financial flexibility and control, as well as an explicit consideration of the macro-economic consequences of food policies on the level of aggregate demand, and the size of the trade and budget deficit [44] .

Limitations and Areas for Further Research

The aim of this study was to apply a market equilibrium displacement model to estimate the nutritional effects of food policies and to rank target-group-oriented policies in terms of cost-effectiveness. It must be emphasized, however, that this is only an initial attempt to evaluate some aspects of a complex phenomenon. It was limited by the assumptions needed to make the analysis tractable and by the data sample. Future research should take the following limitations into consideration.

The demand systems used were complete only with respect to the food subgroup: since the demand for food was a function only of food prices and the food budget, we were not able to account for food-non-food interactions in estimating the elasticities. Although we later computed an income elasticity of food expenditures to make allowances for non-food expenditures, the methodology needs to be refined when more complete and reliable data are available. The assumption of a separable utility function was a consequence of understated income data and the absence of data on total expenditure in this data set; without these data, the entire system with expenditures for other components could not be estimated. This limitation was serious, since preferences for food and non-food commodities have a profound nutritional impact, especially upon the lower income groups. The following steps should be undertaken to remedy this limitation. First, more complete household data must be collected; these must include items on total expenditures, broken down into broad groups. Second, an expanded demand system must be estimated using these data, so as to obtain a complete set of elasticities to be used in the market intervention model. Third, with cross-sectional data gathered over time, it will also be possible to estimate demand parameters that can be used for short-run simulations. These data will enable the researcher to study the nutritional impact of policies that affect not only food prices and the food budget, but also more general policies like tax, wage, or subsidy policies.

A second major limitation arose from the partial equilibrium nature of the model itself, which did not make the determination of incomes, prices, and quantities endogenous. Thus, the approach was really a comparative statics approach (comparing static not dynamic equilibria) and posed the question: given the values of parameters that can be affected by policy, how will nutrient consumption change? While the results of the simulations shed light on the potential impact of food policy, the answers are necessarily limited. It is, therefore, desirable to expand the model to consider both macro-micro interactions and to build in some endogeneity, as in the case of McCarthy and Taylor for Pakistan [26].

Aside from the limitations of linearity, there were other limitations which must not be overlooked. We have estimated only the direct treasury costs of target-group-oriented policies, ignoring administrative costs and welfare costs; an examination of the overall welfare costs using a social demand function is desirable. We must be prepared to include non-marketable benefits and to become involved in interpersonal comparisons of utility, valuing differently the increment of consumption of a well-nourished individual and that of a malnourished one [19]. Also, we did not account for issues of intra-family distribution of nutrients and the presence of especially vulnerable members of the household. These are issues which definitely deserve greater attention in future research.

A final caveat is in order: while the simulations were based upon response parameters estimated from Philippine data, they do not present a complete picture of the Philippine situation. In the light of the recent economic crisis, structural and behavioural adjustments may have occurred that are not captured in this simplified model. Thus, the results should be taken only as indicative of the results of food market intervention policies. This shortcoming, therefore, emphasizes the need for up-to-date and reliable data to be used as inputs into policy analysis. This study has been a modest attempt in that direction.

Despite its limitations, the study has enabled us to pinpoint and evaluate alternatives that can be used to increase nutrient consumption by the lowest income groups, Given the existence of social and economic multipliers between nutrition and other sectors and variables (e.g. health, productivity, and wages), and the important link between incomes and nutritional status, the need for distribution oriented economic growth has been emphasized. Nutrition intervention programmes must co-operate with this process, and must therefore be designed in such a manner as to reinforce and be consistent with desirable patterns of economic growth [7] .

AKNOWLEDGEMENTS

The author wishes to acknowledge the assistance of F. V. Lisondra for computer programming and Reynaldo

Antonio R. Mante in the preparation of the final report. The comments of Per Pinstrup-Andersen, Shlomo Reutlinger, and James Pines are greatly appreciated.

NOTES

1. Most of the empirical evidence is found in Bautista et al. [3]. This study computed domestic resource costs and effective protection rates (EPR) for a large number of import-substituting industries and found that these were quite high, the average EPR for manufacturing being 44 percent.

2. As a matter of policy, however, the Philippines does not intend to produce rice for the world market. According to Lim, one of the reasons is the limited market for Philippine rice [22] . Most Philippine rice mills are inefficient, producing from 35 to 50 percent broken rice, compared to the world standard of 5 to 10 percent. In addition, the Philippines had the unfortunate experience of losing about 90 million pesos in rice exports between 1977 and 1979. Rice was sold at a price below the cost of production since allowing the stocks to spoil would have cost the government more.

3. According to Mangahas, the difference in per capita calorie supplies between the countries in East and South-East Asia that are barely on the margin of food security and those that are clearly over the threshold is more in the vicinity of 25 percent, and even then food poverty may not yet be completely eradicated in the better-off countries [25].

4. Due to the importance of calorie consumption as a limiting factor in nutrition, emphasis must be given to gains in calorie intake by vulnerable groups. At the level of the at-risk groups, caloric adequacy should override all other nutritional considerations [13]. In cases where protein consumption is adequate but calorie consumption is not, for example, consumed protein would be used for energy instead of bodybuilding mechanisms.

5. Net intake = edible portion - plate waste. As-purchased weights include both edible and non-edible portions.

6. In 1984 the Food and Nutrition Research Institute of the Philippines based this marginal level for energy adequacy on a coefficient of variation of about 20 percent for energy expenditures by various occupational groups [15].

7. Since the poor spend a large proportion of their income on food, a food-budget transfer is likely to have substantial nutritional effects. Kumar has shown that food-linked transfers improve nutritional status more than other sources of income [20]; other authors (see, for example, references 26 and 42) have proposed that the marginal propensity to consume food from transfer income is substantially greater than the propensity to consume ordinary income. Such transfers may be politically more feasible than direct income or asset transfers.

8. Income elasticity is computed as:

where E is the percentage change operator, EQi/EY is the income elasticity of good i, EQi/EFB is the food-budget elasticity of good i, dFB/dY is the marginal budget share and Y/FB is the reciprocal of the budget share. To some extent, these estimates are very rough since they are based on expenditure shares from the 1971 Family Income and Expenditure Surveys ( FIES) of the National Census and Statistics Office, not actual budget shares However, unlike the FNRI survey, the FIES has data on total expenditures. A bias probably exists for the higher income groups since there would be a greater difference between expenditure shares and budget shares.

9. Needed percentage change in the food budget (or income) is computed as: desired percentage change in nutrient consumption/food-budget elasticity of total nutrient consumption (or income elasticity of total nutrient consumption).

10. For example, for Regalado, the first stratum has a calorie deficit of 12.73 percent and the second of 7.43 percent. The third and fourth strata are in excess by 4.51 and 19.80 percent respectively [36]. The estimates of sufficiency may be biased upwards since calorie intake was computed by multiplying quantity consumed by the nutrient equivalent, without deducting inedible portion and plate waste. This bias is indicated in an average adequacy of 100,58 percent, as compared with the Food and Nutrition Research Institute's average of 88.6 percent, the latter adjusted for plate waste and inedible portion, and thus representing actual intake 114, 151.

11. Of course, these can be modified through nutrition education programmer. However, recent experience with nutrition intervention programmer has shown that these are not as effective as direct programmer, such as subsidy and transfer policies.

12. The Pilot Food Discount Project covers 18 barangays in Abra, Antique, and Cotabato. A 30 percent discount on rice and a 50 percent discount on cooking oil are available for limited quantities of the commodities concerned. The project will be in effect for a year; the results are encouraging but not yet conclusive (interview with Marito Garcia, project director, 20 August 1984).

13. See Quisumbing 1341 for a detailed breakdown by commodity of the nutrient consumption changes.

REFERENCES

1. E. F. Aviguetero et al., "Income and Food Consumption: Summary of 19 Economic Surveys," Bulletin 78-15 (Planning Service, Ministry of Agriculture, Quezon City, Philippines, 1978).

2. R. M. Bautista, "Inflation in the Philippines," in J. Encarnacion et al., eds., Philippine Economic Problems in Perspective (Institute of Economic Development and Research, School of Economics, University of the Philippines, Diliman, Quezon City, 1976).

3. R. M. Bautista et al., Industrial Promotion Policies in the Philippines (Philippine Institute for Development Studies, Makati, 1979).

4. E. C. Bennagen, "Staple Food Consumption in the Philippines," Working Paper no. 5, Rice Policies in South-East Asia Project (International Food Policy Research institute, International Fertilizer Development Center, International Rice Research Institute, Washington, D.C., 1982).

5. Boediono, "Elasticitas permintaan untuk berbagai barang di Indonesia: penerapan metode frisch" [Demand Elasticities for Various Goods in Indonesia: The French Estimating Technique], Ekonomi dan kouangan Indonesia [Economics and Finance in Indonesian, 2613): 345-359 11978).

6. H. E. Bouis, "Demand for Cereal Staples in the Philippines," paper presented at the IFPRI-IRRI-IFDC Workshop on Rice Policies in South-East Asia Project, Jakarta, Indonesia, 17-20 August 1982.

7. D. L. Call and F. J. Levinson, "A Systematic Approach to Nutrition Intervention Programs," in A. Berg, N. S. Scrimshaw, and D. L. Call, eds., Nutrition, National Development and Planning (MIT Press, Cambridge, Mass,, 1971).

8. D. B. Canlas, "Estimating Price and Income Elasticities of the Demand for Food: The Philippines, 1965," paper presented at the Nutrition Symposium Seminar Series (National Nutrition Council, Philippines), University of the Philippines School of Economics, Diliman, Quezon City, 6 July 1983.

9. R. L. Clarete, "Who Pays for the CCSF Levy," paper presented at the University of the Philippines School of Economics, Diliman, Quezon City, March 1980.

10. L. T. Crisologo, "The Distributive Effects of Consumer Price Control Policies, 1971-1979," unpublished M.A, thesis (School of Economics, University of the Philippines, Diliman, Quezon City, 1981).

11. C. C. David, "Economic Policies and Philippines Agriculture," Philippine Institute for Development Studies Working Paper 83-02 (Philippine Institute for Development Studies, Makati 1 983).

12. K. Ferrer-Guldager, "The Demand for Selected Agricultural Products for Household Consumption 1970-1980," unpublished M.Sc. thesis (Asian Social Institute, Manila, 1977).

13. C. A. Florencio, "The Philippine Nutrition Program: At the Doorstep of its Second Decade," paper presented at the sixth session of the Leonides S. Virata Round Table on Development Policies, Development Academy of the Philippines, 8 December 1982.

14. Food and Nutrition Research Institute (FNRI), First Nation wide Nutrition Survey, Philippines, 1978, 2nd rev. (FNRI, Manila, 1981).

15. Food and Nutrition Research Institute (FNRI), Second Nation wide Nutrition Survey, Philippines, 1982 (FNRI, Manila, 1984).

16. H. W. Goldman and C. G. Ranade, "Food Consumption Behaviour by Income Class in Rural and Urban Philippines," Occasional Paper, no, 90 Department of Agricultural Economics, Cornell University, Ithaca, N.Y., 1976).

17. C. W. Gray, "Food Consumption Parameters for Brazil and Their Application to Food Policy," Research Report, no. 32 (International Food Policy Research Institute, Washington, D.C., 1982).

18, Integrated Agricultural Production and Marketing Project, Philippine Food and Agricultural Development Projects for the 7980's 2nd rev. (Ministry of Agriculture, Diliman, Quezon City, Philippines, 1980).

19. L. Joy, "Nutrition intervention Programmes: Identification and Selection," in A. Berg, N. S. Scrimshaw and D. L. Call, ads., Nutrition, National Development and Planning (MIT Press, Cambridge, Mass., 1971).

20. S. Kumar, "Impact of Subsidized Rice on Food Consumption and Nutrition in Kerala," Research Report, no, 5 (International Food Policy Research Institute, Washington, D.C., 1979).

21. D. E, Kunkels, J. C. Alix, and V. Orogo, "Estimates of Demand Elasticities for Selected Agricultural Products in Major Philippine Areas: Manila, Urban and Rural Areas, 1976-1980," Journal of Agricultural Economics and Development, 8;97-121 (1978).

22. A. C. Lim, "A Review of the Political Economy of Food in the Philippines," in M. Mangahas et al., "The Distributional Impact of Food Policy on Nutrition: A Political Economy Study," report submitted by the Research for Development Department (Development Academy of the Philippines to the International Food Policy Research Institute, Pasig, Metro Manila, 1984).

23. N. Lustig, "Direct and Indirect Measures to Ensure Access to Food Supplies," paper presented at the Symposium on World Food Security, Food and Agriculture Organization, Rome, 3-7 September 1984.

24. M. Mangahas, "Philippine Rice Policy Reconsidered in Terms of Urban Bias," Institute of Economic Development and Research, School of Economics, University of the Philippines, Discussion Paper 72-8 [University of the Philippines, Diliman, Quezon City, 1972).

25. M. Mangahas, "The Relevance of Poverty Measurement to Food Security Policy," paper presented at the Fourth Biennial Conference of the Agricultural Economics Society of South-East Asia, Singapore, 3 November 1981.

26. F. D. McCarthy and L. Taylor, "Macro Food Policy Planning: A General Equilibrium Model for Pakistan," Review of Economics and Statistics, 62: 107-121 (1980).

27. National Census Statistics Office (NCSO), 1975 Family Income and Expenditure Survey (Special Tabulation, NCSO, Manila, 1983).

28. National Economic and Development Authority (NEDA}, Philippine Food Balance Sheets CY 1953 to CY 1972, CY 1973, CY 1974, CY 1975 11975);CY 1976 (1976);CY 1977 to 1981 (NEDA, Manila, 1985).

29. National Economic and Development Authority (NEDA), Philippine Statistical Yearbook 1984 (NEDA, Manila, Philippines, 1985).

30. R. K. Perrin and G. M. Scobie, "Market intervention Policies for Increasing the Consumption of Nutrients by Low-income Households," American Journal of Agricultural Economics, 63: 73-81 (1981).

31. P. Pinstrup-Andersen, N. R. de Londono, and E. Hoover, "The Impact of Increasing Food Supply on Human Nutrition: Implications for Commodity Priorities in Agricultural Research and Policy," American Journal of Agricultural Economics, 58: 131-142 (1976).

32. Policy Analysis Staff, Ministry of Agriculture, unpublished tables (Diliman, Quezon City, Philippines, 1982).

33. M. A. R. Quisumbing, "Estimating the Distributional Impact of Food Market Intervention Policies on Nutrition," unpublished Ph.D. dissertation (School of Economics, University of the Philippines, Diliman, Quezon City, 1985).

34. M. A. R. Quisumbing, "Food Consumption Parameters for Nutrition Policy Analysis: Some Results from the 1978 FNRI Consumption Survey," in M. Mangahas et al., The Distributional Impact of Food Policy on Nutrition: A Political Economy Study, report submitted by the Research for Development Department, Development Academy of the Philippines, Food Policy Research Institute (Development Academy of the Philippines, Pasig, Metro Manila, 1984).

35. V, V. B. Rao, "Measurements of Deprivation and Poverty Based on the Proportion Spent on Food: An Exploratory Exercise," World Development, 9: 337-353 (1981)

36. B. M. Regalado, "The Distributional Impact of Food Policies on Nutrition in the Less-developed Countries: The Case of the Philippines," M.Sc. thesis (College of Development Economics and Management, University of the Philippines at Los Baños, Laguna, 1984).

37. E. San Juan, "A Complete Demand Model for the Philippines," M.Sc. thesis (University of the Philippines College of Development Economics and Management, Los Baños, Laguna, 1978).

38. M. Selowsky, "Target-group-oriented Food Programs: Cost-effectiveness Comparisons," American Journal of Agricultural Economics, 61: 988-944 ( 1979).

39. A. K. Sen, Poverty and Famines: An Essay in Entitlement and Deprivation (Oxford University Press, London, 1981).

40. J. G. Snell, "Estimating Demand Parameters from Secondary Data: Problems and Pitfalls- A Philippine Case," Journal of Agricultural Economics and Development, 10: 201-219 (1980).

41. P. Streeten, "Food Prices as a Reflection of Political Power," Ceres: FAO Review on Agriculture and Development, 16: 16-22 (1983).

42. L. Taylor, S. Horton, and D. Raft, "Food Subsidy Programs: Practice and Policy Lessons," mimeo (Massachusetts Institute of Technology, Cambridge, Mass., 1983).

43. C. P. Timmer, "Is There 'Curvature' in the Slutsky Matrix?" Review of Economics and Statistics, 58: 395-402 ( 1981).

44. C. P. Timmer, W. P. Falcon, and S. R. Pearson, Food Policy Analysis (Johns Hopkins University Press, Baltimore, 1983).

45. C. P. Timmer and H. Alderman, "Estimating Consumption Parameters for Food Policy Analysis, "American Journal of Agricultural Economics, 61: 982-987 (1979).

46. P. Trairatvorakul, "The Effects on Income Distribution and Nutrition of Alternative Rice Price Policies in Thailand," Research Report, no. 46 (International Food Policy Research Institute, Washington, D.C., 1984).

47. P. Trairatvorakul, "An Economic Study of Food Consumption in Thailand," paper presented at the IFPRI-IRRI-IFDC Workshop on Rice Policies in South-East Asia Project, Jakarta, Indonesia, 17-20 August 1982.

48. M. Treadgold and R. N. Hooley, "Decontrol and the Reduction of Income Flows: A Second Look, "Philippine Economic Journal, 6(2): 109-128 (1967).

Economic Recession, Adjustment Policies, and Nutrition

Arising from a symposium on "Economic Recession, Adjustment Policies, and Nutrition," held at its Twelfth Session at the United Nations University in Tokyo on 7 and 8 April 1986, the ACC Subcommittee on Nutrition draws the following to the attention of the ACC:

1. The economic recession has had a detrimental impact on nutrition. Certain adjustment policies, particularly those aimed at redressing balance of payments problems, have often aggravated the situation as an undesirable side effect. This outcome is not inevitable if appropriate measures are taken, as has been shown in several cases.
2. Reductions in public expenditure on health, education, and other basic services, and some alterations in price structures, coupled with unemployment and falling incomes, have compounded the negative effects on nutrition. The poor have been the most affected. Stable or even improving trends in malnutrition and child mortality rates are being reversed. This adverse situation affects a country's human capital and long-term economic development.
3. The ACC Subcommittee on Nutrition requests that the ACC recommends that nutrition objectives for the poor form an explicit part of adjustment policies and programmes of governments and member organizations, including special compensatory measures where appropriate, with a view to providing an adequate level of nutrition for vulnerable groups. Some countries and organizations of the United Nations system have recently given prominence to these approaches.

The ACC Subcommittee on Nutrition will continue to address this vitally important issue.

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