FOOD SECURITY

Concepts, Basic Facts,and Measurement Issues

June 26 to July 7, 2006

Dhaka, Bangladesh

Rao 5b:

Policies for Raising

Food Entitlements

Learning: The learning goal is to develop the ability to identify both direct and indirect policy options for raising food entitlements of the food-insecure population, with a focus on the variety of targeted and non-targeted programmed options.

Brief Contents

• poverty reduction, entitlements, safety nets and FS

• targeted policy interventions to improve access to food

• impact path of targeted interventions

• targeted asset distribution and production support

• public works, their assessment and their cost-effectiveness

• food for work programmes

• special and supplemental feeding programmes

• targeted food subsidies: geographical and commodity

targeting

• fair price and ration shops; food stamps

Poverty And Food Entitlements:

Access to Food• Insufficient access is often crucial problem, not a general

shortage of food

• Access to adequate food as a prerequisite for FS applies to the national as well as the individual HH level.

NATIONAL LEVEL

• With a production deficit, national access depends on availability of foreign exchange (import capacity) which may be limited due to debt service burdens and chronic balance of payments deficits

• Thus, improved national access depends on– BOTH maintaining macro balance and growth of foreign earnings

– AND an international financial and trade regime that is favourable to poor, food-dependent countries

Access to Food: HH Level

• HH access depends on food entitlements

• FIS occurs if means are insufficient and so is

directly related to poverty

• Targeted approaches will be required to

support the vulnerable, a group larger than the

actually poor or food-deficient (see Table)

Targeted policy interventions to

improve access to food

Type of interventions Target groups Impact on food entitlements

Targeted asset distribution

e.g., land reform

Small farmers,

Subsistence farmers,

Tenant farmers, Urban poor

Poor (sub-) urban dwellers

Increased AG income = increased

HH food demand

Increased HH food supplies from

subsistence production

Public works

Food-for-work (FFW)

Rural landless,

Rural and urban poor, un- and

under-employed

Increased cash income =increased

HH food demand;

Increased income in kind of food =

increased HH food supplies

Targeted food subsidies

e.g. fair price shops

Urban poor

Rural poor

Specific vulnerable groups

Increased real income due to lower

food prices = increased HH food

demand

Direct food transfers

e.g. relief assistance

Specific vulnerable groups, e.g.

displaced, disaster-affected, female

headed HH, underweight children, etc.

Increased individual and/or

HH food supplies through

direct food transfers

Impact path of targeted interventions on

factors determining access to food

Targeted Asset Distribution and

Production Support• These can include all measures with two features:

1) the measures address specific constraints that the vulnerable or FIS AG producers face;

2) the measures are effective in reaching the target group(s).

• This requires:

1) Identification of the target groups;

2) Identification of the constraints faced to increased production;

3) Design of appropriate measures to overcome the constraints;

4) Implementation of the programme;

5) Monitoring of the programme performance.

• To keep cost-effectiveness ratio in control, coverage of the targeted group must be high.

The Arithmetic of Cost-Effectiveness

in Public Works Assume that a programme begins in a region in which 1,000 HHs subsist on an

average of $1 a day and other HHs earn in excess of $2 a day. We want to raise

HH income of the first to at least $2 a day. Further assume that working in the

programme costs participants 50 cents a day out-of-pocket for added food,

travel, etc. A wage of $2.50 would then be enough to attract the target

population and keep away other workers who earn more than $2 a day. If the

value of a day's work performed under the programme is $2.50 and it costs

$3.50 for wages and materials, the public cost of augmenting incomes is $1. For

each dollar spent on the programme, the target population's income would

increase by $1. If the value of a day's work were $3, each dollar spent on

augmenting income would increase the target population's income by $2.

Clearly, this programme would be cost-effective.

Public works programs rarely achieve this cost-effectiveness. If the value of a

day's work were $1 rather than $2.50, it would cost the state $2.50 for each

dollar of income transferred to the target population. If the daily wage offered

were $3.50 rather than $2.50, the programme would attract many workers from

outside the target population. It might then cost the state as much as $5 to $10

to augment the income of the people in the target population by $1 a day.

Public Works Programmes

PWP are the main type of targeted interventions with people paid in cash or food

Four categories of public work projects can be distinguished

• Emergency relief projects, providing temporary (food) wage employment to supplement/replace crisis-induced income loss

• Seasonal projects, aimed at supplementing the income of poor HHs during slack AG seasons

• Regular infrastruc, projects aimed to create productive assets while tapping surplus labor & giving employment for poor HH

• Long-term employment-generation projects, designed to tackle chronic un- and under-employment by offering continuous job opportunities, particularly to the urban poor and the landless.

Assessment of PWPs

• Compared to other forms of targeted assistance, PWPs have 2 additional advantages:

• assets created through e.g. rural roads, dams, land conservation

• self-targeting nature, if properly designed: attract only those who have no alternative source of income and employment.

• Targeting is effective only if those employed are paid below market wages. Else, it would attract the non-poor or the not-unemployed.

Assessment of PWPs (contd)

• Cost-effectiveness depends on: net income the target

group derives and on value of the works performed or

assets created compared to the costs of the PWP.

• But cost-effectiveness must be considered not in itself

but in conjunction with assistance given to vulnerable

groups.

• Only projects which can absorb a large amount of

unskilled labour are suitable for implementation under

public works arrangements.

Food-for-Work (FFW)

• FFW projects are a special type of PWS where payment to the employed is in food.

• Rationale: combination of employment creation, FS and development objectives.

• Often, main reason comes from food aid provided by external donors.

• Extensive debate about appropriate form of payment: cash or kind. Even with food aid, this can be monetized. Monetisation means the food is sold and the funds used to finance PWP.

Food-for-Work – contd.

• FFW participants usually sell part of the food received

to have cash for non-food needs. With large FFW

programmes, this 'informal monetisation' can depress

food prices. This, again, depresses the participants' own

real income (lower value of the food received) and

farmers' income in the area.

• The need to avoid the negative effects of monetization

and lacking clear case for one or other form of

payment, the optimal solution may be a combination of

both.

Targeted Food Subsidies

• Given their high fiscal costs and market distorting effects, general food subsidies are often replaced by targeted subsidies.

• These are designed to reach needy groups. This can yield substantial fiscal savings while maintaining benefits to the poor and vulnerable.

• However, targeting also incurs special costs and has specific infrastructural requirements i.e., need to screen beneficiaries, to set up special distribution network, and for effective administration and monitoring.

More on Targeted Food Subsidies

• Trade-off between administrative costs and leakage of subsidy to non-target groups.

• Targeting may also cause social friction and political problems, as targeting always means that certain population groups are excluded from the subsidies.

• The effects of food subsidies on HH FS result from a real income and a substitution effect. Both imply increased HH food demand.

• Food subsidies may be targeted geographically, by commodity, through a special distribution network (fair price shops/ration shops), food stamps.

Geographical targeting

• Subsidies are exclusively directed to areas where vulnerable groups are concentrated. These could be the urban/suburban housing and squatter areas of poor families, or rural areas with acute, seasonal or chronic food shortages.

• Simple geographical targeting involves low administrative costs but will also benefit those HHs in the area who are less poor and not affected by food shortages.

• To avoid this, geographical targeting may be combined with an additional targeting method, e.g. ration cards for poor HHs only. But this will raise administrative costs.

Targeting by commodity

• Targeting by commodity can be applied where poor and non-poor groups have different consumption patterns e.g., coarse grains, roots and tubers VS fine grains.

• Subsidies on "inferior" commodities are self-targeting and so cost-effective.

• To prevent misuse as animal feed, etc., safeguards (e.g quantity restrictions, food stamps) can help.

• But if aim is to make good certain nutritional deficiencies (e.g. protein deficiencies of children and mothers) with suitable food commodities (e.g. milk, dairy products), then, commodity targeting will be inappropriate or insufficient.

Fair price/ration shops

• Fair price/ration shops are special outlets for the sale of subsidised commodities.

• They can be a form of geographical targeting. Finer targeting can be achieved with rules concerning types and quantities of commodities .

• Compared to other approaches to targeted subsidies, additional costs accrue from the need to set up and to manage a particular distribution system. Such costs are largely avoided in the case of a food stamp programme, as discussed in the following section.

Food stamps

• Food stamps target subsidies by distributing coupons to eligible groups and can be used to buy set commodities in specific shops and the retailer refunded against the stamps.

• Beneficiaries can choose from a range of commodities so coupons have a "near-money" property. Food stamps can be both cost-effective and an attractive alternative to general food subsidies.

• Crucial difficulties with food stamps include:

1) Beneficiaries must be identified and registered. This is generally insurmountable in many poor countries.

2) They can be financially abused.

3) Inflation can rapidly erode food stamp values.

Direct food transfers

Direct food transfers mean a free distribution of food rations to the beneficiaries through a particular distribution network.

Free distribution of relief rations

• Necessary in the wake of natural or man-made disasters at least as a transition measure.

• Targeting is usually best achieved if daily rations are distributed. But this is administratively costly and requires the beneficiaries to come to the distribution centre every day.

Special/supp. feeding programmes

• Effective when targeted to high risk individuals, such as children, pregnant and nursing mothers, old and sick people.

• Administratively intensive in terms of screening and reaching eligible people. Existing institutions such as health centres or schools are used for distribution.

• Sometimes special food distribution or feeding centres need to be established to minimize leakage within HHs.

• But if the whole family is FIS, some such intra-family leakage may be a small price to pay to give nutritional benefits for the other HH members.

• School feeding programmes can provide an effective channel for distributing food to children of low-income families and an incentive for such families to send their children to school.