Sources of Domestic Food Price Volatility and Child Malnutrition: evidence from Niger and Malawi GIOVANNI ANDREA CORNIA, LAURA DEOTTI and MARIA SASSI University of Florence, Save the Children and University of Pavia ICABR Annual Conference, Ravello, June 2013

Much attention was paid to impact of world food prices of / This obscured domestic factors s impact on child nutrition in SSA, i.e. the long term food supply impact of agricultural policies; huge and persistent seasonal variation in food production; impact of (still recurrent!) famines. After testing impact of changes in world food prices on domestic prices ….. this paper tests influence of 3 above variables on child malnutrition

How large the transmission of world food prices on domestic food prices in SSA? Large literature ….but conclusions vary on basis of specific factors such as dependence on imported food, magnitude of transport costs and trade margins, world tradability of domestic staple food, and integration with global mkt exchange rate variations, Thus in parts of SSA is difficult to argue that the world price is main driver of domestic food prices while domestic prices often exhibit large rises in parallell with declines of world prices

Niger and Malawi their structural features (small, land short, bordering bigger countries, landlocked, low input subsist. agriculture, single staple) make them representative of several SSA countries affected by major problems of: -Chronic; -Seasonal; and -Acute; food insecurity and child malnutrition.

Theoretical framework to asses child malnutrition (based on Sens entitlement approach) A households control over food (and thus child malnutrition) depends on its entitlement, i.e. a set of commodity bundles it commands in society ENTITLEMENTS: -Production-based entitlements (food produced for self-consumption) -Exchange-based entitlements (food acquired through mkt exchange) -wage–based entitlements -Inheritance and transfer-based entitlements These entitlements change (at different speeds) over the l.term, seasons & during famines

Food entitlement bundles of a household Food available Food produced for self- consumption Good sold Wage labour Transfers received Income form assets sold

Factors affecting food entitlements & child malnutrition -Long-term food price and security (which depends on gains in agricultural productivity – and therefore on agricultural policies); -easonal variations in food prices (depend on storage capacity & credit availability); -Price changes during food acute crises/famine (depend also on food security policies) -Changes in value of the entitlements over these three time dimensions

Methodology of empirical analysis we decompose food price vector into three price sub-vectors reflecting the: Trend price component (reflecting – inter alia - long term gains in agricultural productivity) Seasonal price component (reflecting the efficiency of credit mkts and inter-temporal smoothing) Famine price component (reflecting the gov. capacity to respond to large price shocks ) A residual price component (which reflects various effects, such as the price of inputs) We correlate these food price components (sub-vectors) to the number of children admitted to feeding centers

Methodology (contd) Nominal food price data were deflated with the CPI The dynamics of trend and seasonal component suggested that the 4 price components interact according to a multiplicative model: FP = TPC x SPC x FPC x RPC Monthly Seasonal Adjust. Method allows separating seasonal (SPC) effects from the l.term component (TPC) of the aggregate price trend. the long term trend (TPC) was calculated by mean of the Hodrick-Prescot Filter and then subtracted from the aggregate price trend so as to obtain the random (RPC) and famine (FPC) price components.

Price trend component – monthly data Malawi: Maize (January 2003 – December 2009) Niger: Millet (January 2006 – December 2010) Note: TPC = Trend price component

Seasonal and famine food price components and number of children admitted per feeding centre – monthly data Malawi: Maize (January 2003 – December 2009) Niger: Millet (January 2006 – December 2010) Note: CAF/NC = child admissions by feeding centre; SPC = Seasonal price component; FPC = Famine price component

Methodology (contd) We regress the 4 price components on the n. of child admissions We control for hunger season dummy and number of feeding centers Do not include – due to lack of data – the value of entitlements. Yet –during seasonal fluctuations/famines- they correlate(-) with food prices We ignore world prices as in the 2000s their trend did not significantly affect domestic prices

VariableMalawiNiger Log-log OLS estimates Model 1Model 2Model 3Model 1Model 2Model 3 Constant term 5.914*** 1.139***5.710***1.062** ** Trend price component *** ***-0.702***12.05***10.624***11.84*** Seasonal price component 1.676***1.908*** ***1.727***1.089 Famine price component *0.331*-2.881***-2.012**-2.699*** Residual price component Number of feeding centre 1.205***0.427*** Hunger season dummy 0.782***0.317*** Adj R F- statistics 9.91***107.93***11.73***72.84***73.13***66.6*** Durbin Watson OLS log-log regression of n.child admissions to feeding centres on price components – monthly data ( – Malawi Niger))

Results Despite data & methodological limitations, regressions analysis suggests that: the moderate l. term food price rise in Malawi (due to rising land yields) helped reducing child malnutrit. Opposite was true in Niger (no support to agriculture) Seasonal price rises are a major cause of child malnutrition in both countries. Such effect correlates closely with hunger seasons dummy (dominated by price effect) The famines in Niger where well responded to, it helped contain child malnutrition. This was not the case in Malawi In both, the rise in feeding centers contributed to the increase in admissions

Implications for policy research -Suitable policies aimed at intensifying agricultural production and rising land yield to contain domestic prices & reduce child malnutrition; -Role of long-term policies, particularly in the agricultural sector; -Role of credit/storage policies for addressing seasonal food price fluctuations; -Rethinking food security policies during famines;