Food Consumption Patterns and Implications for Poverty Reduction in Pakistan

Economics RESEARCH ARTICLE PRESENTATION BY:

Tahira Sultana & Aisha Fahim (MBA-I)

Pakistan made vital progress in increasing per capita availability of major food items, like as, cereals, meat, milk etc.

Per capita calorie intake increased from 2078 in 1949-50 to 2450 in 2012-13.

Data shows that nearly half of the population is currently unable to meet its minimum (subsistence) caloric requirements for healthy and productive living (Malik et al. 2014)

Since 2008 rise in the price of essential food items and the decline in real wages have adversely affected the access to food.

Introduction

National survey based household level data show that:

on average households spend nearly half of their total expenditure on food

As a result, a rise in food prices has adverse effects on the welfare of a large proportion of population.

Food crisis of 2008 highlighted the importance of these behaviors.

Rising food prices hurt many developing countries including Pakistan.

The world food price index increased by 39.5 percentage points in just two years 2006-2008.

Since 2006, food prices have continued to rise.

An increase by 42% has been observed in the world food price index.

The prices of meats, dairy products, cereals, oils and sugars increased by 31, 59, 60, 47 and 3.6%

Many references show that the food price shock and the resulting global economic recession increased the incidence of food insecurity, hunger, and poverty in many developing countries (Ivanic and Martin, 2008; Harttgen and Klasen, 2012).

When price of food increases, demand for non-food items decreases.(substitute of non-food items)

In Pakistan, (Haq et al ) measured: the extent of welfare looses due to rising food price by estimating variations. They also found: the food price crises of 2008. In Pakistan, since 2006-2007,prices of most food items

have been increased 100%. Pakistani economists have examined: the effect of price change on consumption pattern by the estimation of price and income elasticity. (Siddiqui et al) These studies gave significant difference of price and

income response to different food items across different population in Pakistan.

For the estimation of income and price elasticity, we use:

LA-AIDS (Linear Approximate Almost Ideal Demand System) model by Deaton and Muellbauer (1980a: 1980b)

LA-AIDS model satisfies the desirable properties of a demand theory.

LA-AIDS derives budget share equation from the specification of :

PIGLOG (Price Independent Generalized Logarithmic) cost function by Muellbauer (1976)

Methodology

The data used for this study,derived from nationally representative Household Integrated Economic Survey(HIES)(2010-2011)

HIES covered 16,341 households, in two stages, from rural and urban areas from all over the Pakistan.

In 1st stage1,180 primary sampling units were selected in rural and urban areas.

In 2nd stage, the sample of 16,341 households selected from primary sampling units.

By random sampling scheme, 16 or 12 households selected from primary sampling units.

HIES collected the detailed information on quantity and value of consumption of food items.

This information enables us to examine budget share of food items to estimate LA-AIDS system.

DATA

In this part we examined food budget shares, calories consumption and the cost of calories across poor and non-poor households.

Food budget shares Food-54% of total expenditure 46% urban areas, 58% rural areas. Of total expenditure, non-poor spend 51% and poor 57%

on food. Average Rs.1,695 per adult equivalent per month are

spent on food. Rs.1137 – poor, Rs.2070 -non-poor Wheat 22% of food expenditure for poor, (20% in urban

areas & 22.9% in rural areas). Wheat for non-poor expense is 14.5%, (11.9% in urban

areas & 15.9% in rural areas).

Consumption Patterns of Food

Food groups

Overall(Urban) %

Non poor(Urban)%

Poor(Urban)%

Overall(Rural)%

Non-poor(Rural)%

Poor(Rural)%

Overall (Pakistan)%

Non poor(Pakistan)%

Poor(Pakistan)%

Share of food in total

46.5

42.5 52.4 57.6 56.1 60 53.8

51.4 57.4

Wheat 15.2

11.9 20.1 18.7 15.9 22.9 17.5

14.5 22

Rice 3.8 3.6 4 3.8 3.8 3.7 3.8 3.7 3.8

Other cereals

0.4 0.4 0.3 0.4 0.4 0.4 0.4 0.4 0.4

Pulses 2.9 2.8 3.2 2.9 2.9 2.9 2.9 2.8 3

Fruits/Vegetables

13.3

13.5 13 12.9 13.1 12.7 13 13.2 12.8

Diary 24.3

26.3 21.3 24.3 26.9 20.4 24.3

26.7 20.7

Calorie consumptionAverage calorie consumption is reported in

Table 2, shows that wheat provides bulk of calories.

Nearly 52% of the calories come from wheat for poor households.

This proportion is higher in rural areas than that in urban areas.

The second largest source of calories for the poor is cooking oil/fats followed by dairy products and sugars.

Calorie shares of Food Items (%) by Urban, Rural and Poverty Status (2010-11)

Food groups

Overall(Urban)

Non poor(Urban)

Poor(Urban)

Overall(Rural)

Non-poor(Rural)

Poor(Rural)

Overall (Pakistan)

Non poor(Pakistan)

Poor(Pakistan)

Share of food in total

2,086 2,289 1,782 2,351 2,664 1,882 2,260 2,535 1,848

Wheat 42.6 38.2 49.2 48.6 45.4 53.3 46.5 43 51.9

Rice 6 6 6.1 5.3 5.4 5.2 5.6 5.6 5,5

Other cereals

0.5 0.5 0.3 0.7 0.8 0.6 0.6 0.7 0.5

Pulses 2.6 2.7 2.5 2.2 2.3 2 2.3 2.4 2.2

Fruits/Vegetables

5 5.3 4.5 4.2 4.4 4 4.5 4.7 4.2

Diary 13.4 15.7 10

Cost of CaloriesWheat is the major source of calories, it can

become more expensive if its price continuously rises.

Pakistani diet is not calorie efficient by means of expenditure.

The cost per calorie varies significantly across rural and urban areas.

Using avg. food expenditure/adult/day and calories/day we compute avg.cost of 100 cal.

In terms of wheat, we computed the cost of 100cal. Derived from wheat.

Results are present in table 3.The results show that non-poor spend more to

get 100cal. (in both urban & rural areas)

Region

Population% of total

Total calories

Food expenditure(Rs.)

100 calories cost Overall FoOd(Rs.)

Expenditure on wheat adult equivalent(Rs.)

Calories from wheat

100 calories cost Wheat(Rs.)

Rural poor

31.2 1,882 36.77 1.95 8.15 1,006.9 0.81

Rural non-poor

35.6 2,664 67 2.52 7.73 1,207.6 0.64

Urban poor

15.8 1,782 40.06 2.25 9.20 881.3 1.04

Urban non-poor

17.5 2,289 74.82 3.27 7.25 871.7 0.83

National

130.12 2,260 56.96 2.52 7.28 1,041.1 0.70

Estimated Demand Elasticities In this part we prent the estimates from LA-AIDS

model for 2010-11 Per capita demand elasticity can be controlled for

various socio economic conditions i.e: poverty. Variations in price of food items is due to: (a) Seasonality effecti- wheat consumption higher in April-JuneIi-rice consumption is higher in Jan-MarchIii-Meat consumption is higher in Oct-DecIv-Fruits and vegetables are higher in July-Sep.

Socio-economic condition is more better in urban areas than in rural

Employment wage is more in urban than in rural

Higher prices in urban than in ruralPoverty % in rural is 48%, while urban is

25%Pay is more for urban than in rural areas.

(b) Standard of people living in urban and rural areas.

Own price elasticities:-indicates price change in one commodity according to availability.

cross price elasticities:-indicates price change in one commodity on demand of another.

Own and cross price elasticity represents the consumer’s response to price change.

Determination of welfare effect of price change can be done by:

i-computed uncompensate ii-compued compensatei-computed uncompensate:- Represents changes in quantity demand as a

result of price change It captures substitute and income effect

Own and cross price elasticities:

Less value of cross price elasticity suggest large consumption of wheat and rice.

It also shows the importance of wheat and diary product for household in Pakistan irrespective of the place of residence.

ii-compued compensate It represents only substitute effect as a result of price change Keeping level of utility constant. <uncompensate indicate goods are normal.

The average availability of wheat has fluctuated around 10 kg per capita per month since 2001-02.

While the per capita consumption has remained lower not only than the per capita availability but also than the recommended quantity of 10 kg per capita per month.

The overall gap between total availability and consumption has been increasing over time.

wheat is the most important food item in the diet of Pakistani

It provides bulk of calories (almost 48 percent). Its demand is very inelastic . Preferences are very strong. An increase in the price of wheat may not result in

substitution with other food items. However, substitution with non-food items is possible.

Food consumption pattern & its implications for poverty reduction:-

Our analysis highlights several critical aspects of the situation. These are summarized below:

1. Limited dietary diversity amongst Pakistani households.

2. A large proportion of households consume less than the recommended amount of calories.

3. Consumption patterns vary across rural and urban areas and for poor and non-poor households.

4. Households maintain the original utility levels by making substitution.

5. Rising prices of wheat adversely effects calorie consumption and poverty status if it is measured in terms of calorie intake.

Conclusions and Policy Implications