copenhagen consensus 2012 challenge paper

7/31/2019 Copenhagen Consensus 2012 Challenge Paper

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HUNGER AND MALNUTRITIONJohn Hoddinott

Mark Rosegrant

Maximo Torero

challenge paper


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Investmentstoreducehungerandundernutrition

JohnHoddinott

MarkRosegrant

Maximo

Torero

March30,2012

ThisversionApril9,2012

Paperpreparedfor2012GlobalCopenhagenConsensus.

Hoddinott,Rosegrant,Torero,InternationalFoodPolicyResearchInstituteAddressforcorrespondence:JohnHoddinott,IFPRI,2033KStreetNW,WashingtonDC,USA,20006.

[email protected]


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1.Introduction:Thechallengeofhungerandundernutrition

Currentestimatessuggestthatthereareapproximately925millionhungrypeopleintheworld.

Justunder180millionpreschoolchildrenarestunted,thatistheyarethevictimsofchronic

undernutrition.Thisdeprivationisnotbecauseofinsufficientfoodproduction.Approximately

2,100kcals/person/dayprovidessufficientenergyformostdailyactivities;currentpercapita

globalfoodproduction,at2,796kcal/person/dayiswellinexcessofthisrequirement.Given

thatthereismorethanenoughfoodintheworldtofeeditsinhabitants,globalhungerisnotan

insolubleproblem.

Deprivationinaworldofplentyisanintrinsicrationaleforinvestmentsthatreduce

hungerandundernutrition,ourfocusinthispaper,aswithpreviousCopenhagenConsensus

(CC)papersonthistopic,Behrman,AldermanandHoddinott(2004)andHorton,Aldermanand

Rivera(2008)isontheinstrumentalcasefordoingso.Initssimplestform,thecentral

argumentofthispaperisthattheseinvestmentsaresimplygoodeconomics.Oursolutions,

however,representapartialdeparturefromthoseearlierCCpapers.First,wereintroduce

attentiontosolutionstohungerwithafocusoninvestmentsthatwillincreaseglobalfood

production.Thismightseemstrangegivenourobservationthatglobalfoodproductionexceeds

globalfoodneeds.ButasweargueinSection3,theseinvestmentsareneededfortworeasons:

tolowerpricessoastomakefoodmoreaffordable;andbecausegiventheconsequencesof

climatechange,therecanbenocomplacencyregardingglobalfoodproduction.Second,

previousCCpapersonhungerandundernutritionhaveconsideredveryspecificinterventions

thatfocusonsingledimensionsofundernutrition.Inthispaper,weexaminetheeconomiccase

forbundlingthese.Ourproposedinvestmentsare:

Investment1Acceleratingyieldenhancements Investment2Marketinnovationsthatreducehunger Investment3Interventionsreducethemicronutrientmalnutritionandreducethe

prevalenceofstunting

Webeginwithbackgroundmaterialthatcontextualizesourproposedsolutions:What

arethecausesofhunger?;Howmanyhungryandundernourishedpeoplearethereinthe

world?;Andwhatarethelikelytrendsinhungeroverthenext2535years?Wethendescribe


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ourthreeproposedinvestmentsexplaininghoweachaddressestheproblemsofhungerand

undernutritionanddescribingtheircostsandbenefits.Caveatsandcautionsarenotedin

section4andourconcludingsectionsummarizesthecasefortheseinvestments.

2.Understandingglobalhunger

Thissectionprovidesbackgroundmaterialthatcontextualizesourproposedsolutions.We

coverthefollowingtopics:

Whatarethecausesofhunger?Here,wepresentaconceptualmodelthatidentifies

thecausesofhunger.Wedosoinalargelynontechnicalway,thoughwewillalso

brieflyexplainhowthiscanbederivedusingformally.Weplaceourproposedsolutions

withinthiscausalframework.

Howmanyhungrypeoplearethereintheworldandwheredotheylive?

Whatarethelikelytrendsinhungeroverthenext2535years?

2.1Whatarethecausesofhunger?

Definitions

Webeginwiththreedefinitions:foodsecurity,hungerandnutritionalstatus.

Theconceptoffoodsecurityhasspatialandtemporaldimensions.Thespatialdimension

referstothedegreeofaggregationatwhichfoodsecurityisbeingconsidered.Itispossibleto

analyzefoodsecurityattheglobal,continental,national,subnational,village,household,or

individuallevel.Thetemporaldimensionreferstothetimeframeoverwhichfoodsecurityis

beingconsidered.Adistinctionisoftenmadebetweenchronicfoodinsecuritytheinabilityto

meetfoodneedsonanongoingbasisandtransitoryfoodinsecurity,whentheinabilityto

meetfoodneedsisofatemporarynature(MaxwellandFrankenberger1992).Transitoryfood

insecurityissometimesdividedintotwosubcategories:cyclical,wherethereisaregular

patterntofoodinsecurity,suchastheleanseasonthatoccursintheperiodjustbefore

harvest;andtemporary,whichistheresultofashortterm,exogenousshocksuchasadrought

orflood(Hoddinott,2001).Mindfulofthesedimensions,wefollowthecurrent,standard

definitionoffoodsecurity:


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Foodsecurityexistswhenallpeople,atalltimes,havephysical,socialandeconomic

accesstosufficient,safeandnutritiousfoodwhichmeetstheirdietaryneedsandfood

preferencesforanactiveandhealthylife.Householdfoodsecurityistheapplicationof

thisconcepttothefamilylevel,withindividualswithinhouseholdsasthefocusof

concern.Foodinsecurityexistswhenpeopledonothaveadequatephysical,social

oreconomicaccesstofoodasdefinedabove(FAO,2010,p.8)

HungerisAcondition,inwhichpeoplelackthebasicfoodintaketoprovidethemwith

theenergyandnutrientsforfullyproductivelives(HungerTaskForce,2003,p.33).Hunger

andfoodsecurityarerelatedbutarenotsynonymous.Anabsenceofhungerdoesnotimply

foodsecurityand,particularlyintimesofstress,householdsandindividualsmaygohungryin

ordertosafeguardlongertermfoodsecurity.

Nutrientsprovidedbyfoodcombinewithotherfactors,includingthehealthstateofthe

personconsumingthefood,toproducenutritionalstatus.Someformsofpoornutritional

statusoftendescribedasundernutritionreflectanabsenceofmacroormicronutrientswhich

maybeexacerbatedbydebilitatinghealthstressessuchasparasites.1Undernutritionwith

regardtomacroandmicronutrientscontinuestobethedominantnutritionalprobleminmost

developingcountries.Otherformsofmalnutrition,sometimesinelegantlytermed

overnutrition,resultfromtheexcessivecaloricintake,exacerbatedbydiseasessuchasdiabetes

andlowlevelsofphysicalactivityareconsiderableconcerninupperandmanymiddleincome

countries.Wedonotconsiderovernutritionfurther.

Aconceptualframework

Foodsecurity,hungerandundernutritionreflectthepurposiveactionsofindividualsgiven

preferencesandconstraints.Ourconceptualframeworkforthinkingaboutthesehasfour

components:settings,resources,activitiesandoutcomes.2

1Somewhatconfusingly,FAOusesthewordundernourishmentbutinamannerthatisdifferentfrom

undernutrition.FAOdefinesundernourishmenttoexistwhencaloricintakeisbelowtheminimumdietaryenergy

requirement(MDER)(FAO,2010).TheMDERistheamountofenergyneededforlightactivityandtomaintaina

minimumacceptableweightforattainedheight.Itvariesbycountryandfromyeartoyeardependingonthe

genderandagestructureofthepopulation.2Therearemanymanygoodconceptualframeworksforfoodsecurityandnutritionandinsettingthisoutwedo

notprivilegeoursovertheseothers.Wenotethatwhatwepresenthereattemptstoencompassapproaches

foundindevelopmenteconomics,thefoodsecurityliterature,developmentdiscourseandnutrition.Whatwe


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Settingsreferstothebroaderenvironmentinwhichahouseholdissituatedandwhich

createbothopportunitiesandconstraintstotheactionsbyhouseholdsandindividuals.We

describetheseintermsoffivecategories:physical,social,legal,governanceandeconomic.

Thephysicalsettingreferstothenaturalandmanmadeenvironment.Itincludesthe

levelandvariabilityofrainfall,accesstoirrigation,availabilityofcommonpropertyresources

suchasgrazingland,forestsandfisheryresources,elevation,soilfertility,theextentof

environmentaldegradation,exposuretorapidonsetnaturaldisasters,distancestomarkets,

andtheavailabilityandqualityofinfrastructure healthclinics,schools,roads,marketsand

telecommunications.Thephysicalenvironmentalsoincorporatesphenomenathataffect

humanhealthtemperature;rainfall;accesstosafewater;thepresenceofcommunicable

humanandzoonoticdiseasesallbeingexamples.

Thesocialsettingcapturessuchfactorsastheexistenceoftrust,reciprocity,social

cohesionandstrife.Theexistenceofethnictensionsandconflicts,conflictsbetweenother

groups(egthelandlessandthelanded),genderrelationsandnormsregardinggenderroles,the

presence(orabsence)ofcivilsocietyorganizationsarealsopartofthesocialsetting.Normsof

genderroles,ofcorrectbehaviorsandfolkwisdomforexample,whattypeoffoods

mothersshouldfeedtheirchildrenarealsopartofthesocialsetting.

Thelegalsettingcanbethoughtofastherulesofthegameunderwhicheconomic

exchangetakesplace.Assuch,itaffectsagriculturethroughrestrictionsandopportunitiesit

createsfortheproductionandsaleofdifferentfoods,theregulationoflabor,capitalandfood

markets.Thelegalsettingincludestheformalandinformalrulesregardingtheownershipand

useofassets,politicalfreedomssuchastherightofexpressionandrestrictionsonpersonal

liberties.Thelegalsettingislinked,butisdistinctfromthegovernancesetting.Thegovernance

describeherecanbereadilyrecastasanagriculturalhouseholdmodel(Singh,SquireandStrauss,1986)extended

toincorporatehealthandnutrition(asinBehrmanandDeolalikar,1988;BehrmanandHoddinott,2005;Strauss

andThomas1995),extendedtocaptureintrahouseholdandgenderallocationissues(Pitt,Rosenzweigand

Hassan,1990;Haddad,HoddinottandAlderman,1997)anddynamicsofhealthandnutrition(Hoddinottand

Kinsey,2001).ItcanalsobeseenasanelaborationofSensentitlementtheoryoffamine(Sen,1981a,1981b).The

discussionofresourcesbearssimilaritytocomponentsofSustainableLivelihoodsapproaches(DfID,1999).For

children,thediscussionofnutritionaloutcomesbearssimilaritiestoUNICEFsCausalFrameworkofMalnutrition

(MaxwellandFrankenberger,1992,p.25).ThisexpositionbuildsonideasfoundinBaulchandHoddinott(2000),

HoddinottandQuisumbing(2010)andHoddinott(2012).


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settingcaptureshowrulesaredeveloped,implementedandenforced.Thisincludesthe

politicalprocesseswhichcreaterulesforexample,centralizedordecentralizeddecision

making,dictatorialordemocraticandsoonandtheimplementationoftheserulesthrough

bureaucracies,parastatalsandthirdpartyorganizations.

Finally,theeconomicsettingcapturespoliciesthataffectthelevel,returns,and

variabilityofreturnsonassetsand,assuch,influencechoicesregardingproductiveactivities

undertakenbyindividuals,firmsandhouseholds.Inoursetup,thishastwoprincipal

components.Therearemacrolevelconsiderations:economicpolicy(fiscalandmonetary);

balanceofpayments;exchangerates;foreignexchangereserves;opportunitiesandconstraints

foreconomicgrowth;andtrendsingrowthandemployment.Therearemesolevelormarket

levelconsiderationsthatcapturetheirstructure,conduct,andperformanceasmeasuredby

pricelevels,variability,andtrendsaswellasgovernmentpoliciestowardsthese.Whilemany

marketsaffectthelivelihoodsandwellbeingofpoorpeopleofparticularimportancehereis

thefunctioningofthemarketforfood.Relevantconsiderationshereincludethecontestability

ofsuchmarkets,theextentofdomestic,regionalandinternationalmarketintegrationandthe

presenceandlevelofdutiesorquantitativerestrictions(suchasquotas)oninternaland

externaltrade.

Householdshaveresources.Theycanbedividedintotwobroadcategories:time(or

laborpower)andcapital.Timereferstotheavailabilityofphysicallaborforwork.Wedivide

capitalintothreecategories.Oneareassetssuchasland,toolsandequipmentusedfor

agriculturalornonagriculturalproduction,livestock,socialcapitalandfinancialresourcesthat,

whencombinedwithlabor,produceincome.Asecondishumancapitalintheformofformal

schoolingandknowledge.Knowledgeincludeshowtorecognizeandtreatillness,howto

maintaingoodhealth.Italsoincludesknowledgeofgoodnutritionpracticessuchas

appropriatecomplementaryfoodsandthefrequencyoffeedingofyoungchildren.Thefinal

resourceishumancapitalintheformofhealthandnutritionstatusspecifically,thephysical

capacitytodowork.Somehouseholdresources,suchashealthandschooling,arealwaysheld

byindividualswhileotherssuchaslandandfinancialcapitalmaybeindividually(forexample,

menandwomenmaynotpooltheirlandholdings)orcollectivelyowned.


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Householdsallocatetheseresourcestodifferenttypesoflivelihoodstrategiesor

activities.Theseactivitiescanbedividedinanynumberofways,forexample:agricultural

activities;wageworkoutsidethehousehold;andnonagriculturalownbusinessactivities.Some

oftheseareadirectsourceoffoodwhileothersgeneratecash.Inaddition,householdsmay

obtainfoodorcashincomefromtransfersreceivedintheformofremittancesorgiftsfrom

othercommunitymembersorfromthecommunityitselforthroughgovernmentinterventions.

Conditionalontheresourcesavailabletothehousehold,thechoiceofaparticularsetof

activitiesisaffectedbyperceptionsofthelevelandvariabilityofreturnstoeachactivity,the

timeperiodoverwhichthosereturnsareearned,andthecorrelationofreturnsacross

activities.Forexample,thehouseholdmaydecidetogrowamixofcropsthatembodydiffering

levelsofsusceptibilitytoclimaticshocksandreturns.

Theseactivitiesgenerateincome.Buttherelationshipbetweentheseallocationsand

outcomessuchasfoodsecurity,hungerornutritionisnotdeterministic.First,randomevents

orshockscan,andindeeddooccur.Differentenvironmental,economic,governance,social

andlegalsettingswillproducedifferentcombinationsofpossibleshocks. Thesecanaffectthe

stockofassets,thereturnstotheseassetsindifferentactivitiesandtherelationshipbetween

incomegeneratedandconsumptionorothermeasuresofwellbeing.Second,households

allocateincometogoodsthataffectfoodsecurityandnutritionalstatus,othergoods,and

savings.Choicesmadeacrossthesereflectpreferencesofhouseholds(eitherexpressed

collectivelyorastheoutcomeofbargainingamongstindividualmembers),thepricesofall

goodsthattheyfaceandthesettingsinwhichtheyfindthemselves.Goodsthataffectfood

securityincludefoodconsumptionatthehouseholdlevel(referredtoasfoodaccessinmuchof

thefoodsecurityliterature);goodsdirectlyrelatedtohealthcare,suchasmedicines;andgoods

thataffectthehealthenvironment,suchasshelter,sanitation,andwater.Thesethreegoods,

togetherwithknowledgeandpracticeofgoodnutritionalandhealthpractices(calledcare

behaviors)andthepublichealthenvironment(forexample,theavailabilityofpublicly

providedpotablewater),affectillnessandindividualfoodintake,whichinturngenerates

nutritionalstatusorfoodutilization.Individualintakesareareflectioninpartofindividual

needs,whichthemselveswillvarybyageandsex,byhouseholdchoicessuchasdecisionsto


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protectthemostvulnerablemembersintimesofstressortoallocatecaloriestothosewiththe

highestworkrelatedcaloricneeds,bynormsregardingintrahouseholdfoodallocation(for

example,anormthatmeneatbeforewomenoronewhereproteinrichfoodsaregivento

higherstatushouseholdmembers)and,inthecaseofveryyoungchildren,caregiverpractices

relatingtothefrequencywithwhichinfantsarefed.

2.2Globalestimatesoftheprevalenceofhungerandundernutrition

Hunger

From

our

discussion

of

definitions

and

our

conceptual

framework,

there

are

a

number

of

conceptsthatwecouldconsidermeasuring:foodsecurity;hunger;householdfoodacquisition;

foodintake;andnutritionalstatus.Whileindividualstudiesprovidemanymeasuresofthese,at

thegloballevel,informationislimitedtoaspecificmeasureofhungerandofelementsof

nutritionalstatus.Therearenoestimatesofthenumberofpeoplewhoarefoodinsecure.

Therearenodirectestimatesoftheextentofhungry.Thatistherearenodirectestimates

basedonacomparisonofmeasuredintakesandminimumdietaryrequirements.Instead,the

most

widely

cited

data

on

the

number

of

persons

considered

hungry

come

from

the

United

NationsFoodandAgricultureOrganization(FAO).FAOconstructsanindirectmeasureofthe

followingform:

[FAO]estimatestheprevalenceofundernourishment[orhunger]astheproportion

ofthepopulationintheCountrywithalevelofDietaryEnergyConsumption(DEC)

lowerthantheDietaryEnergyRequirements(DER)(CafieroandGennari,2011).

ThecalculationofDERbeginswithcountrylevelcensusdataonpopulationsize,

disaggregatedbyageandsex.Thedisaggregateddataareneededbecausebasalmetabolic

rateswhichaccountforalargefractionofenergyrequirementsforbodiesatrestdifferby

bothageandsex.ThisthenadjustedforaminimalPhysicalActivityLevel(PAL)compatible

withahealthylife(CafieroandGennari,2011,p.17)andwithanallowanceforthefactthata

certainpercentageofthefemalepopulationwillbepregnantinanygivenyear(FAO,2008).


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DECisbasedoncombiningtwoitemsofinformation.Onanongoingbasis,FAO

constructsestimatesofmeanpercapitadietaryenergysupply(production+stocks post

harvestlosses+commercialimports+foodaid exports)intowhatiscalledafoodbalance

sheet.Whencalculatingthenumberofundernourishedpeople,takesathreeyearaverageof

thesedata.Itthenimposesadistributiononthissupply.Thedistributionisoften,butnot

always,takenfromahouseholdbudgetsurveyfromwhichestimatesofhouseholdcaloric

acquisitionarederived.

Apartfromthereliabilityofcensusdata,theconstructionofcountrylevelDERsis

relativelyunproblematic.Otherelements,however,aremorecontroversial.Dietaryenergy

supplyisnotmeasureddirectlyandsoanyerrorsinitscomponents,suchasfeedandstock

estimatesbothofwhicharenotoriouslydifficulttomeasure,aretransmittedtoit(Jacobsand

Sumner,2002).Ofevengreaterconcernistheconstructionofanassumeddistributionof

caloricintakes.Consider,forexample,thedistributionderivedintheillustrativeexamplefroma

recentNationalHouseholdBudgetSurveyconductedinthehypotheticalcountry(FAO,2008,

p6).Thisshowsthatforthepoorestdecile,averageDECis1554kcal/person/day.Forthe

secondrichestdecile,itis3093andfortherichestdecile,itis3373.Bothareproblematic.The

DECfigureforthepoorestdecileisnearlyidenticaltothedietadministeredtovolunteers

duringtheMinnesotaStarvationExperiment,anintakelevelwhichhaditcontinuedformore

thanthe24weeksoftheexperimentwouldhavelikelyledtothedeathsoftheparticipants

(Keysetal,1950).Attheotherendofthedistribution,therisinglevelsofDECareinconsistent

withmicroeconometricevidenceofHoddinott,SkoufiasandWashburn(2000)andothersthat

showsthatcaloricincomeelasticitiesarevirtuallyzeroinrelativelywealthyhouseholds.A

secondexampleisfoundinthetechnicalappendixtoFAOsStateofFoodInsecurityinthe

World,2010.ThisshowsthatupdatingthedistributionaldataforIndiareducedtheestimated

numberofhungrypeopleby31millionpeoplein200507and57millionpeoplein200002.

Whiledebatesoverthismethodologycontinue,thenumbersproducedbyFAOcurrently

providetheonlyguidetoglobalnumbersofthehungry.3Table2.1providestheseestimatesfor

3FAOswebsitenotes,Duringitsmeetingin2010,theCommitteeonWorldFoodSecurity(CFS)askedFAOto

reviewitsmethodologyforestimatingundernourishmentinordertoprovidemoretimelyupdatesandincorporate


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theperiods196971to2010.Theseshowthataslowdriftdowninabsolutenumbersbetween

196971and199597.Thenumberofundernourishedremainsrelativelyunchangedoverthe

2000sbeforefirstspikingup,thendown,followingthe2008foodpricecrisis.Theglobal

prevalenceofhungerdropsfrom33to14percentbetween196971and200002,risingto18

percentin2009.

Table2.2providesabreakdownbythenumberofpeopleconsideredundernourishedby

region.4ThehungryarefoundpredominantlyinAsia(567million)andsecondarilyinsub

SaharanAfrica(217million);thesetworegionsaccountformorethan90percentoftheworlds

hungry.Unfortunately,eventhisregionaldisaggregationisnotespeciallyhelpful.Sixcountries

China,India,Bangladesh,Pakistan,EthiopiaandtheDemocraticRepublicofCongoaccounted

for62percentoftheglobalhungryin200608.Estimatedchangesinthesecountriesdominate

theheadlinechangesinglobalestimatesofhunger.Forexample,between199092and2005

07,thenumberofhungrypeoplefellby80millioninChinabutroseby65millioninIndiaand

14millioninPakistan.InsubSaharanAfrica,thenumberofhungryroseby32millioninthe

DRCandthisaccountedfor60percentofthecontinentsincreaseinundernourishment

between199092and200507.

Twofurtherlimitationsshouldbenoted.Noneoftheseestimatesgiveusanysenseas

totheseverityofhunger.TheymakenodistinctionbetweensomeonewithDECjustslightly

belowtheDERandsomeonewhoseDECis20or30percentbelowthiscutoffeventhough

hungerforthelatterpersonissignificantlymoresevereandmoredebilitating.Second,they

givenosensewherethehungryarefoundwithinindividualcountries.Behrman,Aldermanand

Hoddinott(2004)citedstatisticsfromtheUNsHungerTaskForce(2003)thatsuggestedthat

approximately50percentofthosewhoarehungrygloballyareinfarmhouseholds,22percent

aretherurallandlessand20percentliveinurbanareasandeightpercentareresource

dependent(pastoralists,fishersetc).Unfortunately,therehavebeennoupdatesofthese.

allrelevantinformation,includinganalysisofthelargenumberofhouseholdsurveysthathavebecomeavailablein

recentyears.Therefore,noupdatedestimatesforthenumberofundernourishedpeoplein2009and2010are

reported,norhasanestimatebeenmadefor2011.(FAO,2012).4Regionalbreakdownsarenotavailableafter200608.


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Undernutrition

Incontrasttothesomewhatmessyapproachestodefiningandmeasuringhungerandfood

insecurity,aconsiderablebodyofknowledgeexistssurroundingthemeasurementof

undernutrition.

Linear(height)growthfailureiswidespreadinpoorcountries.Anestimated175million

ormorepreschoolchildrenarestunted,meaningtheirheightgiventheirageismorethantwo

standarddeviationsbelowthatoftheinternationalreferencestandard(Blacketal.2008;UN

SCN,2010).Table2.3providesdataontheregionaldistributionofstuntingalongwithtrendsin

prevalencessince1990.Inbrief,globallytheprevalenceofstuntinghasbeenfallingsince1990

buttheregionaldistributionalofthistrendisunevenwithrapidfallsbeingobservedineastern

Asia,amoregradualdeclineinLatinAmericaandtheCaribbeanandnochangeinsubSaharan

Africa.ThegreatestconcentrationofstuntedchildrenisfoundinsouthcentralAsia.Table2.4

providescomparablestatisticsontheprevalenceoflowweightforage,aMillenium

DevelopmentGoal(MDG)indicator.Theseshowasimilarpatternofchangeovertime.

Thephysicalandneurologicalconsequencesofgrowthfailurearisingfromchronic

undernourishmentareincreasinglywellunderstood.Chronicnutrientdepletion,resultingfrom

inadequatenutrientintake,infection,orboth,leadstoretardationofskeletalgrowthin

childrenandtoalossof,orfailuretoaccumulate,musclemassandfat(Morris2001);thislost

lineargrowthisneverfullyregained(Steinetal.2010).Chronicundernutritionhasneurological

consequences,adverselyaffectingthehippocampus,damagingchemicalprocessesassociated

withspatialnavigation,memoryformationandreducingmyelinationofaxonfibers;see

Hoddinottetal(2011)forfurtherdiscussionandreferences.

Micronutrientdeficienciesareanotherimportantcomponentofundernutrition.These

arediscussedatlengthinBehrman,AldermanandHoddinott(2004)andHorton,Aldermanand

Rivera(2008)soourtreatmenthereisbrief.Thegreatestconcernlieswithdeficienciesin

VitaminA,iron,iodineandzinc.VitaminAdeficienciesareassociatedwithincreasedriskof

infantandchildmortality;Blacketalestimatethattheyaccountforjustover650,000deaths

annuallyinchildrenunderfive.Currently,approximately163millionpreschoolchildrenare

VitaminAdeficientwiththehighestprevalencesfoundincentralsouthAsia(includingIndia)


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andcentralandwestAfrica.Iodinedeficiencyadverselyaffectsdevelopmentofthecentral

nervoussystemleadingtomentalretardationandstuntedgrowth(UNSCN,2010).While

increasedavailabilityofiodizedsalthasreducediodinedeficiencies,UNSCN(2010)estimates

that1.8billionpeopleareiodinedeficientasmeasuredbylowurinaryiodine.Thevastmajority

ofthesepeople1.3billionarefoundinAsia.

Anemiaiswidespreadinthedevelopingworld.Inwomen,thisleadstoincreasedriskof

maternalmortalityandillhealthandlowmaternalironavailabilityleadstoreducedironstores

innewborns(UNCSN,2010).Irondeficiencyinchildrenconstrainscognitivedevelopment

(UNSCN,2010).Worldwide,morethan40percentofpregnantwomenasare47percentofpre

schoolchildren(Blacketal,2008).UnlikeVitaminAandiodinedeficiencies,theseprevalences

haveremainedstubbornlyhighoverthelasttenyears.Zincdeficiencyaffectschildrens

physicalgrowthandleadstoincreasedsusceptibilitytoanumberofinfectionsincluding

diarrheaandpneumonia(Brownetal,2009).Currently,therearenoglobalestimatesofzinc

deficiency.

2.3TheIMPACTmodel

Inthissection,weprovideanapplicationofthemodeldescribedinsection2.1totwooutcome

measuresdescribedinsection2.2,thenumberofundernourishedpeopleintheworldandthe

numberofundernourishedchildrenasmeasuredbyweightforage.Wedosousingthe

InternationalModelforPolicyAnalysisofAgriculturalCommodityandTrade(IMPACT)model.

IMPACTisapartialequilibrium,multicommodity,multicountrymodel.

IMPACTcoversover46cropsandlivestockcommoditiesincludingcereals,soybeans,

rootsandtubers,meats,milk,eggs,oilseeds,oilcakes,sugar,andfruitsandvegetables.It

includesasetof115countries/regionswhereeachcountryislinkedtotherestoftheworld

throughinternationaltradeand281foodproducingunits(groupedaccordingtopolitical

boundariesandmajorriverbasins)(Rosegrantetal,2008). Itstartswithassumptionsabout

specificaspectsofthesettingsdescribedinsection2.1.Theseincludeassumptionsabout


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populationgrowth,5urbanization,andtherateofincomegrowth.Notethattheextensive

degreeofgeographicdisaggregationintheIMPACTmodelmeansthatindividualcountrylevel

variationsintheseassumptionstypicallyhavelittleimpactongloballevelprojections.IMPACT

alsomakesassumptionsaboutinternationaltraderegimesforbothagriculturalandnon

agriculturalcommodities;itispossible,however,torelaxthese.Forexample,Rosegrant(2008)

describestheconsequencesforglobalfoodpricesoftradedistortingsubsidiestobiofuels.

Crucially,however,IMPACTdoesnottakeonedimensionofthephysicalsettingwater

availabilityanduseasgivenbutinsteadmodelsthisexplicitly.

InIMPACT,agriculturalactivitiesarecarefullymodeled.Growthincropproductionin

eachcountryisdeterminedbycropandinputprices,exogenousratesofproductivitygrowth

andareaexpansion,investmentinirrigation,andwateravailability.Othersourcesofincome

are,inIMPACT,assumedtofollowfromtheWorldBanksEACCstudy(Margulisetal.2010),

updatedforSubSaharanAfricaandSouthAsiancountries.Demandforagricultural

commoditiesisafunctionofprices,income,andpopulationgrowth.Fourcategoriesof

commoditydemandareincluded:food,feed,biofuelsfeedstockandotheruses.Asapartial

equilibriummodel,demandsfornonfoodrelatedgoodsarenotconsidered.Themodellinks

countriesandregionsthroughinternationaltrade,usingaseriesoflinearandnonlinear

equationstoapproximatetheunderlyingproductionanddemandrelationships.World

agriculturalcommoditypricesaredeterminedannuallyatlevelsthatclearinternational

markets.IMPACTisdesignedtorecognizethatthereareinterlinkageswithintheagricultural

sectorandthatexogenouschangescanplayoutincomplexways.Forexample,urbanization

andincomegrowthmeanthatmeatanddairyconsumptionarelikelytogrowrapidlyasbetter

offconsumersdiversifydiets.Whilethismeansthattheconsumptionofcerealspercapitawill

decline,someofthisdeclineisoffsetbyincreaseddemandforanimalfeeds.Foradetailed

descriptionoftheIMPACTmethodology,pleaseseeRosegrantetal.(2008).

IMPACTgenerateslongtermprojectionsoffoodsupply,demand,trade,andpricesthat

enableustoestimatethetrendsinglobalfoodsecuritybetweennowand2050.Thesecanbe

5PopulationprojectionsaretheMediumvariantpopulationgrowthrateprojectionsfromthePopulation

StatisticsdivisionoftheUNandincomeprojectionsareestimatedbytheauthors,drawinguponMillennium

EcosystemAssessment(2005).


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thoughtasbusinessasusualscenariosthatwouldprevailintheabsenceoftheinvestments

wedescribeinsection3.1.Thesebaselinescenariosdonotconsidertheconsequencesfor

agriculturalproductionofclimatechange;wereturntotheseinsection3.2.Withthisinmind,

webeginwithprojectionsforworldpricesofmajoragriculturalcommodities.Theseare

presentedinTable2.6.Pricesincreaseforallmajoragriculturalcommoditiesbetween2010and

2050.Thisisaresultofsignificantriseindemanddespitetheincreaseinproductionandalso

duetoconstraintsoncropproductivityandarea.Pricesincreasessignificantlywithhighest

priceincreaseinrapeseedoilfollowedbymaize,wheatandrice.Rapeseedoilandsoybeanoil

priceincreasesarebecauseofbiofuelinitiativesbyEUandUSthatincreasedemandforthese

oils.Withtheincreaseindemandforlivestockandtheriseinfeedstockprices,largeprice

increasesareseeninlivestocksectorparticularlyforporkandpoultry.Thepriceofpork

increasesby55%andpoultryby47%between2010and2050.

ThebaselineresultsforshareofatriskofhungerareshowninTable2.7.Globally,

IMPACTpredictsthatunderbusinessasusual,thereisessentiallynochangeinthenumberof

hungrypeopleintheworldin2025andonlyamodestdecline,from884to776millionby2050.

Givenapredictedglobalpopulationof9.3billionbytheyear2050,thisprojectionimpliesa

declineintheprevalenceofhungerfrom16to8.2percent.Therearealsosignificantregional

variationsinthedistributionofhunger.InLatinAmericaandtheCaribbeanthereisa24%

declineinthepopulationatriskofhungerbetween2010and2050.SouthAsiawhichhasthe

largestshareofpopulationatriskin2010onlyhasa26%declinewhichisslightlyhigherthan

seeninLatinAmericaandtheCaribbean.Ontheotherhand,theshareincreasesbysignificant

amountsinMiddleEastandNorthAfricaandSubSaharanAfricabetween2010and2050.

IMPACTusesapproximationsofcarebehaviors,thehouseholdhealthenvironmentand

foodintaketoprojectthenumberofchildrenthatwillbeunderweightin2050.Ituses

elasticitiesofrelationshipsbetweenfemaleeducation(wherefemalesecondaryenrollment

ratesserveasproxyforimprovedcarebehaviors),accesstohealthandsanitation(wherelife

expectancyandaccesstosafewaterareusedasproxies)andchangesinfoodavailability(a


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crudeproxyforfoodintake)takenfromacrosscountrystudybySmithandHaddad(2000).6

BaselineprojectionsforunderweightaregiveninTable2.8.Thenumberofunderweight

childrenslowlydriftslower,from163millionin2010to147millionin2025and118millionby

2050.Overthisperiod,thedistributionofunderweightchildrenbecomesincreasingly

concentratedintworegions,SouthAsiaandSubSaharanAfrica.By2050,84percentofall

undernourishedchildrenresideintheseregions.

3.Solutionstoglobalhungerandundernutrition

Inthissection,wedescribesolutionstoreducingglobalhungerandundernutrition.Theseare:

Investment1Acceleratingyieldenhancements Investment2Marketinnovationsthatreducehunger Investment3Interventionsreducethemicronutrientmalnutritionandreducethe

prevalenceofstunting

3.1Acceleratingyieldenhancements

Basiccalculations

Weconsidertheimpactonourbaselineprojectionsofadditionalresearchanddevelopment

investmentsinagriculturalyieldenhancements.Weconstructanalternativescenariothat

assumessignificant,butplausible,increasesintheseinvestmentswithresultingincreasesin

cropandlivestockyields.Theseincluderesearchthatenhancesdrought,heatandsalt

tolerance,identifyinganddisseminatingvarietieswithenhancedyieldpotential,addressing

virulentwheatrust,developingresistancetocattlediseasessuchasEastCoastFever(which

wouldincreasemilkyields)andsoildiagnosticsthatwouldpermitoptimalcombinationsof

organicandinorganicfertilizers.7Specifically,thebaselineIMPACTmodelassumesannual

6Thedatausedtomakethiscalculationareobtainedfrom:theWorldHealthOrganizations GlobalDatabaseon

ChildGrowthMalnutrition,theUnitedNationsAdministrativeCommitteeonCoordination Subcommitteeon

Nutrition,theWorldBanksWorldDevelopmentIndicators,theFAOFAOSTATdatabase,andtheUNESCO

UNESCOSTATdatabase.7vonBraunetal(2008)describetheseinfurtherdetail.


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globalpublicinvestmentinagriculturalR&Dof$5billionperyear.Inouralternativescenario,

weincreasethisannualinvestmentby$8billionto$13billion.

Thisinvestmentincreasesproductivity;itcanbethoughtofasameansbywhich,fora

givensetofinputs(theassetsandlabordescribedinsection2.1),outputincreases.Specifically,

weestimatethatthisinvestmentincreasestheyieldgrowthrateforcropsyieldsby0.40forall

cropsandthelivestockyieldgrowthby0.20. Theimpactofhigherresearchinvestmentonyield

growthratesisestimatedbyusingtheelasticityofyieldswithrespecttoresearchexpenditures.

Theelasticititesaresynthesizedfromtheliterature,includingAleneandCoulibaly,2009;Kiani,

Iqbal,andJaved,2008;Thirtle,Lin,andPiesse,2003;SchimmelpfenigandThirtle,1999;and

Fan,Hazell,andThorat,1998.

Yieldgrowthhasbothincomeandpriceeffects.Theincreaseinproductivityalso

generatesincreasesinagriculturalGDPgrowth,whichleadstototalGDPgrowthaveraging0.25

percentagepointshigherintheworldasawhole. TheimpactofagriculturalR&Dinducedcrop

andlivestockproductivitygrowthonGDPgrowthisderivedbylinkedanalysisusingABAREs

computablegeneralequilibrium(CGE)modelGTEM.Thecomputablegeneralequilibrium(CGE)

modelGTEM(AhammadandMi,2005)isamultiregion,multisector,dynamic,general

equilibriummodeloftheglobaleconomy.GTEMprovidesprojectionsforahostofvariables

includinggrossregionalproduct(aGDPequivalentforGTEMregionaleconomies).TheGDP

variablesfromGTEMwereusedtovalidatetheGDP(andpopulation)inputdatatoachieve

crosssectoralconsistencywiththepartialgeneralequilibriumagriculturalsectormodel

IMPACT(InternationalModelforPolicyAnalysisofAgriculturalCommoditiesandTrade)

throughsoftlinking.OnceconsistentGDPgrowthrateshavebeenestablished,theGDPimpacts

ofincreasedagriculturalproductivitygrowthcanbeestimatedforanyspecifiedincreasein

productivity.

Table3.1showsthepercentchangeintheworldcommoditypricesbetweenthe

baselineandalternativescenariofor2050.Asaresultofhigheryieldsthatincreases

production,thepricesinforalmostallthecommoditydecreasesfromthebaseline.Thelargest

declineinworldpricesis68%forrapeseedoilfollowedby22%forricebetweenbaselineand

alternativescenario.Ifwelookintolivestock,lowerfeedstockcostslowercostsofproduction,


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leadingtoexpansioninproductionandthereforelowerprices.Pricesoflivestockdeclineby

11%to12%betweenbaselineandalternativescenariofor2050.Therefore,withtheincreasein

productivityofbothcropandlivestock,pricesarelowerinthealternativescenariothanthe

baselinein2050.

Table3.2showsIMPACTsprojectionsoftheeffectofthisinvestmentonthenumberof

peopleprojectedtobehungryin2050.Theglobalnumberofhungryfallsfrom766to556

millionpeople,adeclineof27percent.Withanestimatedglobalpopulationof9.3billionby

2050,thisimpliesaglobalprevalenceofhungerof5.9percentmeaningthatprevalencewould

be63percentless(5.9v16)in2050thanitwasin2010.Table3.2alsoshowsthatthis

reductionismostpronouncedinthetwopartsoftheworldwherehungerremainsmost

virulent.Inthisalternativescenario,bothSouthAsiaandSubSaharanAfricabothhavea35%

declinebetweenbaselineandalternativescenario.OtherregionslikeLatinAmericaandthe

Caribbean,MiddleEastandNorthAfrica,andEastAsiaandPacificalsomakesignificant

reductionfromthebaseline.

RecallthatintheIMPACTmodel,theseimprovementsinproductionfeedthroughto

lowernumbersofunderweightchildrenthroughincreasedfoodavailability,oneinputintochild

nutritionalstatus.ResultsareshowninTable3.3.Thereisareductioninthenumberofchildren

predictedtobeunderweight,withthisfigurefallingfrom118to112millionwithhalfofthis

reduction,sixmillionchildren,cominginSubSaharanAfrica.Bycontrast,thereductionin

underweightprevalenceinSouthAsiaisonlytwomillionchildren,afallofonlysixpercent.This

demonstratestheneedtocomplementtheseinvestmentswiththosethatattackothercauses

ofundernutrition.

UnderthisscenarioofincreasedinvestmentsinagriculturalR&D,anadditional$8billion

dollarperyearwould,by2050,reducethenumberofhungrypeopleintheworldby210million

andthenumberofunderweightchildrenbytenmillion.Butwhileimpressivenumbers,these

donotnecessarilyprivilegetheseinvestmentsoverothersbeingconsideredunderCopenhagen

Consensus2012.Mindfulofthis,wenowconstructabenefit:costratiofortheseinvestments.

Costestimatesarestraightforward.Usinga5percentdiscountrate,thenetpresentcost

ofthisadditionalinvestmentbetween2010and2050is$154billion.Wealsoestimatedthe


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welfareimpactsofagriculturalresearchinvestmentsusingahighdiscountratewherewe

doublethediscountrateto10percentandalowdiscountrateof3percent.Thenetpresent

costbetween2010and2050isreducedto$87billionwhenhighdiscountrateisusedandis

increasedto$214billionwiththeapplicationof3percentdiscountrate.

Therearefivepotentialbenefitstreams:i)increasesinwelfaregainsresultingfrom

lowerpricesfacedbyconsumers;ii)welfaregainsfromreducedyieldvolatility;iii)theoption

valueofreducedyieldvolatilityresultingfromclimatechange;iv)productivitygainsderived

fromtheimpactofincreasedcaloricconsumptiononworkerproductivity;andv)theincome

gainsinadulthoodresultingfromreducedundernutritioninearlylife.Weconsideri)andii)

hereandtheremainingpointsinthesubsectionsthatfollow.

Weestimatewelfaregainsbycalculatingthechangesinconsumersurplus,producer

surplus,andnetsurplusarisingfromtheinvestmentinducedchangesincropyields,production

andfoodprices. Thebenefitcostratioisthencomputedastheratioofnetpresentvalueofthe

netsurplustothenetpresentvalueoftheinvestmentcosts.Thewelfarecomponentofthe

calculationsfollowsatraditionaleconomicwelfareanalysisapproachtoestimatethebenefits

tosocietyontheconsumer andproducerside.Ontheconsumersidethisisstraightforward,as

theIMPACTmodelhasdemandcurveswithdemandelasticities,whichallowsustocalculate

theconsumersurplus.Ontheproducerside,itisnotasstraightforward,asthequantity

suppliedofeachcommodityisanareayieldequation,anddoesnotrepresentthetraditional

supplycurvethatreflectstheproducersmarginalcostcurve.Therefore,wehavesynthesized

supplycurvesbylandtypeforeachactivityfromtheareaandyieldfunctions,calculatedthe

producersurplusforeachofthesesupplycurvesandthenaggregatedtothenationallevel.The

totalchangesinconsumerandproducersurplus,whencombined,provideuswithabenefit

flow,whichwethenuseinabenefitcostanalysis,tocompareatechnologysoverallimpactin

theagriculturesector.

Becausecropandlivestockpricesdeclinebymorethantheincreasesinproductivity

growth,thereisa3.87percentdeclineinproducersurplus.Bycontrast,consumersurplusrises

substantially,by16.91percent.Thus,consumers(includingnetconsumingfarmersin

developingcountries)gainsubstantiallyduetothelowerpricesandhigherconsumptioninthe


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highproductivityscenario.Globally,thisadditionalinvestmentinagriculturalR&Draisestotal

welfareby4.06percent,andwithafivepercentdiscountrateyieldsanetpresentvalueof

benefitsof$2475billion,seeTable3.4.TheInternalRateofReturntoincreasedinvestmentsis

61percentwithabenefitcostratioof16.1indicatingthehighreturnstoexpandedinvestment

inagriculturalR&D.

Weassessthesebenefitcostratiosundertwoadditionaldiscountrates(Table3.5). In

thehighdiscountratescenario,wherethediscountrateissetto10percent,producersurplus

declinesby2.42percentandtheconsumersurplusincreasesby10.38percentcomparedto

16.91percentinthealternativescenario.Inthelowdiscountratescenario,wherethediscount

rateissettofivepercent,producersurplusdeclinesby4.67percentandtheconsumersurplus

increasesbyasignificant20.47percent.Thetotalwelfareusingthehighdiscountrateincreases

by2.41percentgivinganetpresentvalueofbenefitsof$702billionwhichisaboutonethird

thevalueofnetbenefitsinthealternativescenario. Butevenwiththisreductioninbenefits

duetothehighdiscountrate,thebenefitcostratioremainshighat8.07.Ontheotherhand,

whenadiscountrateofthreepercentisused,totalwelfareincreasesbyfivepercentgivinga

netbenefitof$4561billion,almosttwicetheamountasseenwiththefivepercentdiscount

rate.Usingthethreepercentdiscountrate,weobtainahighbenefitcostratioof21.31.These

highratesofreturntoagriculturalresearchareconsistentwithalargeliteratureestimatingthe

returnstoagriculturalresearch(Alstonetal,2009).

Theseinvestmentsinnewcropvarietiesandlivestocktechnologiesarenotcountry

specific.AninnovationthatraisesriceproductivitycanbereadilytransferredtoBangladeshor

Thailand.Forthisreason,itdoesnotmakesensetotrytodisaggregatethecostsofthese

increasedinvestmentsbycountryorregion.Thismeansthatwecannotcalculateregional

specificbenefit:costratios.Butabsentanysortofdisaggregation,ourresultsareopentothe

criticismthatwedonotsayanythingaboutthedistributionofbenefits.Isitthecase,for

example,thattheincreasedconsumersurplusisdominatedbygainstowesternconsumers?

Wecancalculatechangesinproducersurplus,consumersurplusandwelfareindifferent

regionsusingdifferentdiscountratesasshowninTables3.6,3.7and3.8.Theseshowclearly

thatwelfaregainsaredominatedbybenefitsaccruingtodevelopingcountries.


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Thesebenefit:costratiosomitthefactthattheseinvestmentsarealsovariability

reducing.Priortotheearly2000s,progressonthishadbeenrelativelyslow.However,new

researchinthelasttenyearsbybothprivateandpublicsectoractorshasdemonstratedthat

forrice(Prayetal,2011;Serrajetal2011),maizeandwheat(Kostandinietal,2009),itis

possibletobreedvarietiesthatarebothhigheryieldingandalsolesssusceptibletodroughtand

otherclimaticstresses.Forexample,Kostandinietal(2009)modelthebenefitsassociatedwith

investmentsthatincreasesdroughttoleranceinrice,maizeandwheatwhilealsoachievingthe

yieldgainsdescribedabove.Specificallytheymeasurethebenefitsofyieldvariancereductions

asthemoneyvalueofreducedvariabilityinincomestoproducersandreducedpricevariability

toconsumers.Calculatingthevalueoftheseiscomplex.Forproducers,theyneedtoaccount

fortheshareofincomederivedfromthesecrops,thesizeofthereductioninyieldvariability,

elasticitiesofsupply,adoptionratesofthesenewtechnologiesandriskpreferences.For

consumers,theyneedtoaccountforpriceelasticitiesofdemand,theshareofexpenditures

thatgotothesestaplesandriskpreferences.Anumberofthesevariables,suchasthe

reductioninyieldvariability,arelocationspecificandintheirpaper,Kostandinietalrestrict

theircalculationstoeightcountries:Bangladesh,Ethiopia,India,Indonesia,Kenya,Nigeria,the

Philippines,andSouthAfrica.Theyestimatethatyieldvariancereductionsgenerateannual

benefitstotheseeightcountriesof$569million,$256milliontoproducersand$313millionto

consumers.8

TheKostandinietalcalculationssuggestthatourbenefit:costratiosareunderestimates

becausethebenefitsofreducedyieldvariabilityareunderestimated.Asanorderofmagnitude

exercise,considerthefollowing.Supposethatthesedroughtresistantvarietiesaremade

availableonawidescalestartingin2025.Thisisaconservativeassumptiongiventhatlarge

scaletrialsofdroughtresistantmaizearealreadyscheduledfor2012.Weconservatively

assumethatthe$569millionisthetotalglobalbenefitresultingfromreductionsinyield

varianceandwillcalculatethestreamofbenefitsfrom2025to2050.Thepresentvalueofthese

benefitsis$7,807million,$5,280millionand$2,213millionunderthree,fiveandtenpercent

8Theyconductsensitivityanalyses,notingthatthesefindingsaresensitivetotheextenttowhichsupplyshocks

inducepricevolatility.


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discountratesrespectively.Table3.9showsthebenefit:costratioswhenthisadditionalbenefit

isincluded.Evenundertheconservativeassumptionsusedhere,thebenefit:costratiosare

large,rangingfrom33.5to57.7dependingonthediscountrateused.

Accountingforclimatechange

TheFourthAssessmentReportoftheIntergovernmentalPanelonClimateChange(IPCC,2007)

concludedthattheevidencesupportingglobalwarminginunequivocalandthatthisisvery

likelytobeaconsequenceofincreasedhumangreenhousecaseconcentrations.Theextentof

thiswarmingissubjecttouncertainty,dependingonassumptionsaboutincomeandpopulation

growth,landusechangesandtechnologicalprogress.TheIPCCconstructsasetofSpecial

ReportonEmissionsScenarios(SRES)thatshowthatby2050,globalmeantemperatureswill

risebyabout1oCundermostscenariosbutthatfurtherrises areexpectedafterthattimewith

themagnitudeofthoserisesbeingscenariodependent.Howdotheimplicationsofclimate

changeaffectourproposedinvestmentsinyieldenhancement?

Nelsonetal(2010)provideadetailedassessmentoftheconsequencesoftheseclimate

changescenariosonglobalfoodsupply,foodprices,theprevalenceofhungerand

undernutritionin2050.TheydosobylinkingIFPRIsIMPACTmodelwiththeDecisionSupport

SystemforAgrotechnologyTransfer(DSSAT)cropmodelsuite.DSSATtakesintoaccount

locationspecificinformationonclimate,soils,andnitrogenapplicationtosimulatemultiyear

outcomesbasedoncropmanagementstrategies,varietalimprovements,changesinsoil

fertilityandchangesinweather.9Nelsonetalnote,Themodelingmethodologyreconcilesthe

limitedspatialresolutionofmacroleveleconomicmodelsthatoperatethroughequilibrium

drivenrelationshipsatanationallevelwithdetailedmodelsofbiophysicalprocessesathigh

spatialresolution(Nelsonetal,2010,p6).Thisallowsthemtotakeintoaccountlocation

specificeffectsofclimatechangeintermsofitsimpactontemperature,precipitationand

9DSSATisunderpinnedbydetaileddatainputsandmodelingwork.Cropmodelsrequiredailyweatherdata,soil

surfaceandprofileinformation,anddetailedcropmanagementasinput.Cropgeneticinformationisdefinedina

cropspeciesfilethatisprovidedbyDSSATandcultivarorvarietyinformationthat[is]providedbytheuser.

Simulationsareinitiatedeitheratplantingorpriortoplantingthroughthesimulationofabarefallowperiod.

Thesesimulationsareconductedatadailystepand,insomecases,atanhourlytimestepdependingonthe

processandthecropmodel.Attheendofthedaytheplantandsoilwater,nitrogenandcarbonbalancesare

updated,aswellasthecropsvegetativeandreproductivedevelopmentstage(DSSAT,2012).


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increasesinatmosphericconcentrationofCO2.10

Theseimpactsareusedtomodel

consequencesforcropproductivity.Inturn:

Theclimatechangedrivenproductivityeffectsareincorporatedintothe

hydrologyandeconomicelementsoftheIMPACTmodeltoassessthecombined

effectsofeconomic,population,andclimatescenarios.Theprocessofmodeling

agriculturalfuturesproceedsroughlyasfollows.Supplyisdeterminedatthe

foodproductionunit(FPU)levelbyfarmerresponsestoprices,conditionedby

assumptionsaboutexogenouslydeterminedarea(AGRs)andyieldgrowthrates

(IPRs)aswellasassumptionsregardingclimateproductivityeffectsonirrigated

andrainfedcrops.Demandisdeterminedatthenationallevelbyconsumer

responsestochangesinnationalincomeandprices.Whensupplyisgreaterthan

demand,exportsoccur.Fortheworld,nettradeinacommoditymustbezero.

Worldpricesareadjustedtoensurethisoutcomeforayear.Thisprocessis

repeatedforeachyearthroughto2050(Nelsonetal,2010,p.20)

Nelsonetal(2010)modeltheseclimatedrivenproductivitychangesunderthreeincome

andpopulationgrowthscenarios.11

Table3.10showsbaselinescenariosfortheproductionof

threecrops,maize,riceandwheat.Comparedtoperfectmitigationinvestmentsthatwould

ensurethatatmosphericconcentrationofCO2in2050werethesameasthosefoundin2010

climatechangereducesmaizeproductionby52.6millionmetrictonnes,riceproductionby37.6

millionmetrictonnes,andwheatproductionby66.7millionmetrictonnes.Linkingthese

changesinagriculturalproductiontotheprevalenceofchildunderweight,Nelsonetalshow

thatundertheirbaselinescenario,absentperfectmitigation,childunderweightwouldbe9.8

percenthigherin2050.Thisisanincreaseof11.5millioninthenumberofundernourished

children.

Havingundertakenthesecalculations,Nelsonetalsimulatetheimpactofanumberof

investmentsthatwouldoffsetthemalignimpactsofclimatechangeonproduction.These

includeboostingproductivitygrowthinavarietyofcropsandimprovementsinirrigation

efficiency.Thefollowingexamplegivesaflavorofthese.Supposethatadditionalspendingis

10Specifically,Nelsonetal(2010)useversion4.5ofDSSAT,withatmosphericconcentrationofCO2in2050setat

369ppm,seeNelsonetal(2010,pp.1418)forfurtherexplanation.11

Theseare:baseline(WorldBankprojectionsforglobalincomegrowthandUNmediumvariantpopulation

projections);pessimistic(lowincomegrowthratesandUNmediumvariantpopulationprojections);andoptimistic

(highincomegrowthratesandUNlowvariantpopulationprojections).SeeNelsonetal(2010,Table1.1)for

furtherdetails.


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undertakenthatraisesproductivitygrowthinwheatproductionbytwopercentperyearin

sevendevelopingcountriesthataccountforabout40percentofglobalwheatproduction.12

Theseinvestmentsreduceexpectedincreasesinwheatpricesbyjustunder50percent.It

reducesthenumberofunderweightchildrenby3.3millionwithmostofthisreduction

occurringinmiddleincomedevelopingcountries.Insodoing,itoffsets28percent(3.3/11.5)of

thepredictedincreaseinchildrensundernutrition.

Nelsonetal(2010)alsonotethatclimatechangemaywellresultinincreasedfrequency

ofextremeweathereventssuchasextendeddroughts.Theygivetheexampleofafailureofthe

monsoonrainsbetween2030and2035asanexample.Werethistooccur,theirmodeling

suggeststhatglobalpriceswouldriseasreducedsupplyfromsouthAsiawouldnotbeoffsetby

increasedproductionelsewhere.Overtheperiod20302040,priceswouldfirstrise,peakingin

2035atincreasesof43percent(wheat),16percent(rice)and67percent(maize)overtrend

beforefallingbacktotrendby2040.Inaddition,thisextendeddroughtwouldincreasethe

numberofunderweightchildrenbyaround900,000.

Movingfromexamplessuchasthesetothecalculationofbenefit:costratiosis

enormouslydifficult.AsNelsonetalcarefullyexplain,differentclimatemodelsproduce

differentpredictionsofthegeographicdistributionoftheimpactsofclimatechange impacts

thatareamplifiedbydifferentassumptionsregardingglobalincomeandpopulationgrowth

whichaffectthepredictedtrajectoryofglobalfoodprices.Inturn,thisaffectsthebenefits

associatedwithinvestmentsinproductivityenhancinginvestmentsindifferentcropsandin

differentcountries.Theyalsonotethatclimatechangeisexpectedtoincreasethefrequencyof

severeweathereventssuchasdroughtsbutitisnotpossibletopredictwhereandwhenthese

willoccurandtheynotethattheirsouthAsiaexampleismeanttobeillustrative.

Inlightofallthis,wedonotcalculateformalbenefit:costratiosofagricultural

investmentsthatmitigatetheimpactofclimatechangeonyieldlevelsandvariability.Instead,

wearguethatthesechangesinducedbyclimatechangeimplythatthereisanoptionvalueto

investmentsinagriculture.Toseethis,considerthefollowing.Wetakethepredictedchanges

inpricetrajectoriesbetween2030and2040thatanextendeddroughtinsouthAsiabetween

12TheseareIndia,Pakistan,Argentina,Iran,Ukraine,China,andKazakhstan.


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2030and2035wouldinduce.Wecalculatethecosttoconsumersofthishigherpricebasedon

currentconsumptionlevelsforthesethreestaples.Thepresentvalueofthisglobalcostis$247

billion.BasedonthepatternsweseeinTables3.6,3.7and3.8,weassumethatathirdofthis

costistransferredtoproducerssothenextwelfarecostis$165billion.Wefurtherassumethat

theprobabilityofaneventofthismagnitudeoccurringis25percentandsothenetpresent

valueofthiscostexcludingcostscreatedbyhigherpricevariabilitythatmightoccurandthe

costsassociatedwithincreasedchildundernutritionis$41billion.Theoptionvalueof

agriculturalinvestmentsthatmitigatetheimpactofclimatechangeonyieldlevelsand

variabilityistheamountofmoneythatonewouldbewillingtopaynowtoreducethecostsof

suchextremeweathereventsinthefuture.Assumingthisoptionvalueispositive,itisafurther

streamofbenefitsinadditiontothosedescribedabove.

Calorieproductivityandundernutritionbenefits

Atleastsincethelate1950s,economistshavehypothesizedalinkbetweencaloricintakeand

workerproductivity(Leibenstein,1957),alinksometimesreferredtoasthewageefficiency

hypothesis.Initssimplestform,theargumentisthatindividualswithverylowcaloricintakes,

possiblyexacerbatedbylowbodymass,haveinsufficientenergytoundertakeremunerative

labor.Dasgupta(1993)providesmoredetails,notingthatunderthishypothesis,lowcaloric

intakesarebothaconsequenceandcauseofpoverty.Teasingouttheselinks,however,is

enormouslycomplicated.Thedatademandsarehigh,requiringdetailedindividuallevel

informationonintakesandphysicalactivitiesaswellasdatathatallowstheanalysttoaccount

forthefactthat,ineconometricterms,bothareendogenous.Giventhesedatarequirements,

notsurprisinglytheempiricalliteratureisscant.Carefullyexecutedstudiesprovidesome

evidencesupportingthewageefficiencyhypothesisbutthatthisevidencetendstobe

locationally,temporally(egharvest,seasonofpeaklabordemand,BehrmanandDeolalikar,

1989)andsexspecific(Pitt,RosenzweigandHassan,1990).Giventhisheterogeneity,wedonot

calculatetheadditionalbenefitstreamderivedfromtheimpactofincreasedcaloric

consumptiononworkerproductivity.Instead,wenotetheimportantimplicationthatthe


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existenceoftheseadditionalbenefitstreamsimpliesthatourbenefit:costratiosare

conservative.

Lastly,Behrman,AldermanandHoddinott(2004)andHorton,AldermanandRivera

(2008)havestressedthatinvestmentsthatreduceundernutritioninpreschoolchildren

provideconsiderableeconomicbenefits.Asdiscussedabove,investmentsinagricultural

researchanddevelopmentdoreduceundernutritionbutthemagnitudeofthischangeis

relativelysmall.

3.2MarketinnovationsthatreducehungerTheconceptualmodeldescribedinsection2.1placedparticularemphasisontheeconomic

settinginwhichahouseholdfindsitself.Wedescribedtheeconomicsettingascapturing

policiesthataffectthelevel,returns,andvariabilityofreturnsonassetsand,assuch,influence

choicesregardingproductiveactivitiesundertakenbyindividuals,firmsandhouseholds.We

notedthatthisincludedmesolevelconsiderationsthatcapturedfoodmarketstructure,

conduct,andperformanceasmeasuredbypricelevels,variability,andtrendsaswellas

governmentpoliciestowardsthese.Roughly80percentoftheglobalhungryand75percentof

theworldspoorliveinruralareasandhalftheglobalhungryaresmallholders.(UNHunger

TaskForce,2003)Givenallthis,arethereinvestmentsthatcanimprovethesesettingsfor

smallholders,forexamplebylinkingfarmstomarkets,reducingtransactioncostorreducing

risk?Inthissection,weconsidertwo:i)theprovisionofmarketinformationthroughcellular

phones;andii)reducingbarrierstofertilizeraccess.

Informationand

Communication

Technologies

Modelsofperfectcompetitionpredictthemaximizationofsocialwelfare.However,this

predictionreliesonasetofcriticalassumptions.Oneofthesekeyconditionsistheprevalence

ofperfectinformation.SincethepublicationofStiglers(1961)seminalwork,suchassumption

hasbeencontested.Imperfectinformationispervasiveinmanyagriculturalmarketsin

developingcountries,aconsequenceofremoteness,poorinfrastructureandthinmarkets.The


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deploymentofInformationandCommunicationTechnologies(ICTs)canremedysomeof

dimensionsofimperfectinformation.Jensen(2010)arguessomeofthemaingainsof

informationinagriculturalmarkets:

Information,ArbitrageandEfficiency:Pricedifferentials(inexcessoftransportationcosts)cansignalagentstoreallocatetheirproductiontowardshigherprofit

markets.Indoingso,therearepotentialgainstoaggregatewelfare.

Information,MarketPowerandWelfareTransfers:Byloweringsearchcosts,phonesenableproducerstoresearchsalesopportunitiesinmoremarketsandtoobtainbetter

pricesfortheirproducts.Thisargumentholdsalsoholdswhenfarmersdonotselldirectlyin

markets.Eveninthepresenceofmonopsonisticmiddlemen,iffarmershavebetterinformation,

tradersmayneedtoofferhigherpricestopreventfarmersfromsellingtheirproductsdirectly

inothermarkets.Thisargumentalsoappliestoinputandtransportcostsasthefollowing

anecdoteillustrates:

Iwasinprocesstotransportmyproduceof(approx1000boxesin2trucks)toDelhi

whenIgotanSMSthroughRMLthatthefreightratefromKotgarhtoDelhiisRs41.07

perbox.Ishowedthismessagetothetruckoperator,whotillthenwascitingarateof

Rs44perbox.FollowingthisIwasabletosettlethetransportingdealatRs.41.07,

finallysavingaround3,000rupees(Reuters,2012).

ReducedPriceVariability:Whenthereisnoinformation(andlimitedarbitrage),pricestendtovarywithlocalsupply.However,wheninformationiswidespread(andthereis

morearbitrage),pricefluctuationsarerelatedtoaggregatesupply.

ProductionPatterns:Informationcanalsoaffectlandusepatterns,wherehouseholdscanshifttowardsmoreprofitablecrops.

Asmallnumberofstudiesexaminetheimpactofimprovedinformationflowson

dimensionsofsmallholderwelfare.Thesetypicallyexploittheexistenceofnaturalexperiments,

suchastherolloutofcellularphoneservicesoraccesstoradiobroadcasts.Theyprovidea

rangeofestimates.Some,suchasSvenssonandYanagizawas(2009)studyoftheimpactof

pricedisseminationviaradiofoundlargeincomegainsthroughhigherrealized,ontheorderof

anincreaseof15percentinmaizeincome.SimilarlylargeeffectswerefoundinPeru(Chong,

Galdo,andTorero,2005;Beuerman,2011)andthePhilippines(LabonneandChase,2009).


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Othersfindmuchsmaller(Goyal,onetosixpercentimpactsonsoyabeanincomeinMadhya

Pradesh,India)ornoeffects,Mitra,Mookherjee,ToreroandVisara(2011)andFafchampsand

Minten(2012).Theliteratureissuggestiveofthepossibilitythatgainstoimprovedinformation

flowsarelargerinsubSaharanAfricathansouthAsiaandthatthesearelargerwhereproducts

aremoreperishable.

Mindfulofthesevariationsinimpacts,considerthefollowinginvestmentthatincreased

farmersaccesstomarketinformationthroughmobilephones.OurmodelhereistheReuters

MarketLight(RML)ProgramwhichiswidelyavailableinIndia(Reuters,2012).UnderRML,fora

monthlyfee,receivecropadvisorySMStextmessages.Thesearetailoredtospecificpointsin

thecropcycle,includinglocationspecificinformationweatherforecasts,localmarketprice

information,andlocalandinternationalcommodityinformation.Userscanconfigurethese

messagessothattheyonlyreceiveinformationmostrelevanttothemintheirlanguageof

choice.InIndia,themonthlycostofthisserviceis$1.50.Weassumethatmessagesareneeded

forsixmonthsandweconvertthisUSdollarcostintopurchasingpowerparitydollarssoasto

applyitacrossanumberofcountries.Inourbasemodel,theannualcostisPPP$21.92per

householdor,assuminghouseholdsizesof5.5persons,PPP$3.98percapita.Wealso

undertakeanalternativecalculationwhere,perhapsbecauseofscaleeconomies,thiscostis

reducedby50percent.Weassumethatbeneficiariesareresponsibleforthepurchaseof

handsets.Thiscanbethoughtofasacommitmentdevicethatselfselectsthosehouseholds

whointendtousethisinformation.13

Inourbasecase,wetakethesimpleaveragesoffourAfricanstudiesoftheimpactsof

improvedmarketinformation(resultsinparentheses):SvensonandYanagizawa(15%),Futch

andMcIntosh(noeffect),AkerandFafchamps(noeffect),andMutoandYamano(positive

impactsforbananasbutnoimpactonmaize)andassumethattheaverageimpactisa3.75

percentincreaseinagriculturalincomesthroughhigherprices.Fourpaperspresentedevidence

fromsouthAsia:Mitraetal(noeffect),Goyal(1.6%),FafchampsandMinten(noeffect)and

Jensen(8%)andthesimpleaverageoftheirestimatedimpactsisa2.4percentincreasein

13Ifweincludedhandsetsaspartoftheinvestment,therewouldbeariskofbeneficiarieschoosingtoparticipate

solelytoreceivethephone.BasicmobilephonesinsouthAsiaandmuchofAfricaarecheap,around$15,and

thereisnoreasonwhysmallgroupsofhouseholdscouldnotpooltheirresourcestopurchasethese.


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agriculturalincomes.Weconsidertwoalternativestothis:i)onewhereweassumebenefitsare

lower14

,aonepercentincreaseinsouthAsiancountriesandatwopercentincreaseinAfrica;

andii)onewherethebasecasebenefitsaredoubled,4.8percentforsouthAsiaand7.5

percentforAfrica.Tocalculatebenefitstreamsandthetotalvalueofbenefitsobtained,we

considertwosouthAsiancountries,BangladeshandIndia,andfourAfricancountries,Senegal,

Ghana,Kenya,andTanzania.Tomaketheseresultscomparableacrosscountries,calculations

forallscenariosarebasedonthefollowingassumptions:

- Weconsiderthepercapitahouseholdexpendituresinruralareasasaproxyforincome.Weusethemostrecenthouseholdsurveyavailableforeachofthesecountries.Datasources

arethefollowing:

o Bangladesh:MeanpercapitaexpenditureinruralareasfromtheHouseholdIncomeandExpenditureSurveyof2005

15

o India:Meanpercapitaexpenditure inruralareas fromthe66throundoftheNationalSampleSurvey(2009/2010)

16.

o Tanzania:Meanpercapitaexpenditureinruralareasfromthe2007HouseholdBudgetSurvey.

o Kenya: Average per capita expenditure of the fifth decile from the Kenya IntegratedHouseholdBudgetSurvey(KIHBS20052006)

17

o Senegal:AverageruralpercapitaexpenditurefromtheEnquteSngalaiseAuprsdesMnages(ESAMII)

18

o Ghana: Average rural per capita household expenditure from the Fifth Round of theGhanaLivingStandardsSurvey(GLSS5).

- Also,weadjusthouseholdexpendituresforinflationandforpurchasingpowerparity(PPP)usingtheWorldBankDevelopment Indicators

19.Thus,allareestimationsarecomparable

acrosscountriesandexpressedin2010PPP$.

14ThisisbasedonthefactthatMitra,Mookherjee,ToreroandVisara(2012),andFafchampsandMinten(2012)

findnosignificanteffectforsomeICTinterventionsinIndiawhileGoyals(2010)estimatessuggestaonepercent

lowerboundfortheimpact.15http://siteresources.worldbank.org/BANGLADESHEXTN/Resources/295759-1240185591585/BanglaPD.pdf16http://mospi.nic.in/mospi_new/upload/Press%20Release%20KI-HCE-66th_8july11.pdf17http://siteresources.worldbank.org/INTAFRREGTOPGENDER/Resources/PAKENYA.pdf18http://ns.ansd.sn/nada/site_enquete/CD_ESAM2/survey0/data/Rapport%20Esam2.pdf


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- Theshareofcropsalesintotalincomeisaroughestimate(40%inAsiaand30%inAfrica).- The povertyelasticityof income isbasedon internationalexperience (minus two), taking

intoaccountthatthebaseisruralincome.

- The affectedpopulation isassumed to be two millionhouseholds in India,one million inBangladesh.InAfrica,theaffectedpopulationisassumedtobe5%oftheruralpopulation.

ThesebasicdataaresummarizedinTable3.11andourresultsarereportedinTable3.12.

Underscenario1withourbaseassumptionsaboutbenefitsandcoststhis

investmentalwaysgeneratesapositiverateofreturn.Acrossthesesixcountries,thebenefit:

costratiosliebetween1.41(Tanzania)and2.09(Kenya).Ifweareverypessimisticaboutthe

benefitsandifwebelievethatitisnotpossibletoreducecosts(anespeciallystrong

assumption),thenthebenefit:costratiosareonlyhighenoughtojustifythisinvestmentin

KenyaandGhana.Butunderanyothersetofassumptions,thesebenefit:costratiosexceed

oneandinsomecasestheydosobyaconsiderablemargin.Forexample,underthehigh

benefit,reducedcostscenario,theserangefrom5.64to8.35.

Investmentsthatincreasecompetitioninthefertilizermarket

Itiswellestablishedthatlowadoptionofimprovedlandmanagementpracticesisoneofthe

mainfactorsbehindlaggingagriculturalproductivityinmanydevelopingcountries.Althoughan

increaseinfertilizeruseisnottheonlysolutiontothisproblem,countriesthathaveincreased

theiragriculturalproductivityhavealsoconsiderablyincreasedtheiruseoffertilizer.Several

regionalandlocalpolicieshavebeenpromotedinthepastyearstostimulatesustainable

fertilizerusewithmixedresults,butnotmuchhasbeensaidaboutthehighandincreasing

dependenceofdevelopingregionsonimportedfertilizer,whichisahighlyconcentrated

industryatthegloballevel.AsshowninTable3.13,asmallnumberofcountriescontrolmostof

theproductioncapacityforthemainnitrogen,phosphate,andpotashfertilizers.Thetopfive

countriescontrolmorethanhalfoftheworldsproductioncapacityforallmajorfertilizer

products.Similarly,exceptforChina,theindustryshowsahighlevelofconcentrationamong

19http://data.worldbank.org/data-catalog/world-development-indicators


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firmswithineachmainproducingcountry.Inmostcases,thetopfourfirmscontrolmorethan

halfofeachcountrysproductioncapacity.

Thehighlevelsofconcentrationinthefertilizerindustrymainlyresultbothfromhigh

requirementsofrawmaterials,whicharenotavailableworldwide,andfrompotential

economiesofscaleinproduction,whichresultincostefficiencies.However,highconcentration

inanindustrymayalsoresultinmarketpowerexertionandtacitcollusionamongfirms,which

mayallowafewcompaniestotakefulladvantage,forexample,ofinternationalpricespikesin

energyandgrainmarketstothedetrimentoffarmerswealth.ConsiderFigure3.1.Thisshows

thatduringthefoodcrisisof2008,whereoilandagriculturalpricesdrasticallyincreased,

ammoniaandureapricesexhibitedevenhigherpricespikes.Bymid2008,whenthecrisiswas

feltmost,ammoniaandureapriceswere23timeslargerthaninmid2007;oilandcornprices,

inturn,were1.51.9timeslarger.Themarketpowereffectscouldbeoutweighingthecost

efficiencyeffectsinthishighlyconcentratedindustry.

HernandezandTorero(2011)analyzethisissueformally.Specifically,theyexaminethe

relationshipbetweenfertilizer(urea)pricesandmarketconcentrationinthefertilizerindustry

usingannualdatafromapanelof38countries.Concentrationismeasuredasthetop4

concentrationratio(CR4),thesumofthemarketsharesofthefourlargestfirmsoperatingin

themarket.Thesharesaremeasuredbothintermsofproductioncapacityandnumberof

plants.Theanalysisaccountsfortherelativeimportanceoffertilizerimportsonuseineach

country.Theestimationresultsindicateapositivecorrelationbetweenpricesandmarket

concentration.A10%decreaseinthetop4concentrationratiousingproductioncapacityto

measuremarketshareleads,onaverage,toan8.2%decreaseinfertilizerprices,whilea10%

decreaseinthetop4concentrationratiousingnumberofplants,leadstoan11.6%decreasein

prices.

Thisevidencesuggeststhattherecouldbeconsiderablewelfaregainsifthis

concentrationcouldbereduced.Oneoptioncouldbetheforciblebreakupofthisconcentrated

industry.Butitisnotimmediatelyobviousthatthisisagoodidea.Quiteapartfromthe

disruptionthiswouldcause,thiscouldwellleadtoalossofeconomiesofscale.Regulationis


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anotherpossibilitybutimposingpricerestrictions,aswellasregulationsgoverningexports,

mightwellleadtounproductiverentseeking.

Anotheralternativeistoinvestintheconstructionofnewproductioncapacity.The

underlyinglogicforthisinvestmentisthatprivatesectoractorsaredeterredfromentering

thesemarketsbythejointexistenceofhighfixedcostsandstrategicpricingbehaviorby

incumbents.Here,weconsiderthecaseofpublicinvestmentinproductioncapacitywiththe

understandingthattheoperationofthefacilitywouldbeturnedovertotheprivatesector.

BasedontheHernandezandTorero(2011)study,wetaketheimpactofincreasedcompetition

onpricesandusethistoestimateitsimpactonfertilizerintakeandcropproduction.Fromthis,

wecalculatecostsandbenefitsovera40yeartimehorizon(20102050)forthesamefour

countriesthatweconsideredforICTinvestment,India,Bangladesh,Senegal,Ghana,Kenyaand

Tanzania.Wealsoestimateimpactonpoverty.

WestartwiththeHernandezandTorerofindings;an8.2%decreaseinpricescouldbe

consideredasaconservativescenariowhilean11.6%decreasecouldberegardedasan

optimisticscenario.Gruhn,GolettiandRoy(1995)reportanaverageelasticityoffertilizer

demandwithrespecttopricesofaround 1.62basedonworkbyDavidandOtsuka(1994)in

Asia.Similarly,Bumb,JohnsonandFuentes(2011)assumethattheelasticityofcropproduction

withrespecttofertilizeruseis0.25.Withtheseelasticities,anestimatedimpactofthechange

inpricesonbothfertilizerintakeandcropproductioncanbederived,asshowninTable3.14.A

10%increaseincompetitioninthefertilizerindustrywillincreasecropproductionby3.3%ina

conservativescenarioandby4.7%intheoptimisticscenario.

Thesimulatedeffectoncropproduction,assumingaconservativescenario,canbeused

toapproximatetheimpactonpovertyreductionusingsomecountriesinSouthAsia(Indiaand

Bangladesh)andAfrica(Senegal,Ghana,KenyaandTanzania)asexamples.Apovertyelasticity

ofincomeof2.0isassumedbasedoninternationalexperience.Theshareofcropsalesintotal

incomeisassumedtobe40percentinSouthAsiaand30percentinAfrica.Basedonthese

calculations,a10percentdecreaseinthelevelofconcentrationinthefertilizerindustry

reducespovertyby2.6%intheSouthAsiancountriesandby2%intheAfricancountries(Table

3.15).Thisisequivalentto20.1millionpeopleinIndia,2.7millioninBangladesh,onehundred


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thousandinSenegal,twohundredthousandinGhana,fourhundredthousandinKenyaand

halfamillioninTanzania.Overall,therewillbeatotalpovertyreductionof24millionpeoplein

thesixcountries.

Inordertodecreasethetop4concentrationratioinSouthAsiaandAfricaby10

percent,itisnecessarytobuildafertilizerplantineachregionwithacorrespondingannual

productioncapacityof1.2millionmetrictons(MT)and0.7millionMT(recallthatinthe

conservativesimulationanalysisabove,theconcentrationmeasureisbasedonproduction

capacity).20

Thenewplantwillabsorbthissharereductionofthetop4firmsineachmarket

andwillnotbelargeenoughtobeamongthetop4producersineachregion.Weassumethat

thecostofbuildinga1.2millionMTplantinSouthAsiawouldroughlyequalaroundUS$1.2

billionandthecostofbuildinga0.7millionMTplantinAfricawouldroughlyequalUS$700

million.21

Forthepurposeofourcost:benefitanalysis,theseinvestmentcostsareprorated

basedontherelativeamountof(nitrogen)fertilizersconsumedbyeachcountry.Forexample,

Indiaaccountsfor93%ofthetotalfertilizerusedbetweenIndiaandBangladesh,soweascribe

93%ofthebuildingcostsoftheplantinSouthAsia(aroundUS$1,111million)toIndia.We

assumethatthecostperMTof(nitrogen)fertilizerproductionisUS$130foraplantsizeover

1,000MTofcapacityperday,seeKim,Taylor,HallahanandSchaible(2001).

Weassumethatonly20%oftheruralpopulationineachcountrywillexperiencean

effectiveincreaseintheirincome(increaseof1.3%inSouthAsiancountriesandof1%in

Africancountries,basedonthesimulationabove).This(conservative)scenarioaccountsforthe

factthatsomefarmersmayalreadybeusingtheoptimalamountoffertilizerwhiletheincrease

infertilizeruseforseveralothersmaystillnotreachacertainlevelwhichresultsinhigher

income.AswithourworkonICTs,percapitahouseholdexpenditureinruralareasisusedasa

proxyforruralincomeusingthemostrecenthouseholdsurveysineachcountry.

ResultsaregiveninTable3.16.Theseshowthatatboththreeandfivepercentdiscount

rates,thenetpresentvaluesoftheseinvestmentsarepositiveforallcountriesexceptKenya.

20Thesenumbersareequivalentto10%oftheannualproductioncapacityreportedbythetop4firmsineach

regionaccordingtoIFDCWorldwideFertilizerCapacityListingbyPlant.21

Thesecostestimatesarebasedontheestimatedcostofanitrogenfertilizerplantcurrentlyunderconstruction

intheDeltaandLagosStatesofNigeria.


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Thetotalnetpresentvalueofsuchapolicyoveratimehorizonof20122050(39years)willbe

equal to US$20.4 billion assuming an annual discount rate of 3% and to US$12.5 billion

assuminganannualdiscountrateof5%.

3.3Bundlinginterventionthatreducemicronutrientdeficienciesandreducetheprevalence

ofstunting

InBehrman,AldermanandHoddinott(2004),CopenhagenConsensussolutionsto

undernutritioncoveredarangeofinterventionsincludingthoserelatingtolowbirthweight,

Improvinginfantandchildnutritioninpopulationswithhighprevalenceofchildmalnutrition,

addressingmicronutrientdeficienciesandnewinvestmentsinagriculturaltechnologies.Twoof

these,addressingmicronutrientdeficienciesandnewinvestmentsinagriculturaltechnologies

wererankedhighlybythe2004CopenhagenConsensuspanelwhileeffortstoreducedlow

birthweightsandimprovinginfantandchildnutritionwereseenasFairinvestments.The

2008CopenhagenConsensus,basedonthepaperbyHorton,AldermanandRivera(2008),

continuedtoratemicronutrientinterventionshighlywithvitaminAandzincsupplementsfor

childrenrankedfirst,ironandiodinefortificantsthirdandbiofortificationfifth.Onecomponent

relevanttostunting,communitybasednutritionprograms,wasrankedninth.

Inthissection,wedothefollowing.Forhighlyrankedmicronutrientinterventions,

vitaminA,zinc,ironandiodine,weupdatebenefit:costratiosbasedonnewstudiespublished

since2008.Second,sincethepublicationofthoseearlierCopenhagenConsensuspapers,there

havebeentwomajordevelopmentsintheevidencebaserelatedtointerventionsthatwill

reducetheprevalenceofgrowthfailure.Theseare:theworkbyBhuttaetal(2008)on

establishingwhichinterventionshavebeendemonstratedtohavethemostpowerfuleffectson

reducingstuntedlineargrowthandthemonographbyHortonetal(2010)thatprovided

detailedcostingsontheseinterventions.Thesenewsourcesprovidethebasisforoursecond

setofinvestmentsrelatedtoundernutrition:apackageofinterventionsthatwillreduce

stunting.


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Updatedestimatesofhighlyrankedmicronutrientinterventions

Weupdatebenefit:costratiosforiodine,iron,VitaminAandzinc.Allofthesearedescribedby

Bhuttaetal(2008)ashavingsufficientevidenceofbenefitstosupporttheirwidespread

implementation.Wenotethatwenowhavebenefit:costestimatesofanoveldeliveryform,

DoublyFortifiedSalt fortifiedwithbothiodineandiron.InTable3.17,wesummarizethe

principalbenefit:costestimatesfrompreviousCopenhagenConsensusestimatesaswellas

newresultsthathaveemergedsince2008.

Severalresultsemerge.First,thebenefit:costratiosforiodizedsaltcontinuetobe

overwhelminglyhighwithmostrecentcalculationsfromRajkumaretals(2012)workin

Ethiopiasuggestingthatthisis81,aratiohigherthanthatreportedbyHorton,Aldermanand

Rivera(2008)butwithintherangesuggestedbyBehrman,AldermanandHoddinott(2004).

Second,themostrecentbenefit:costratiosforVitaminAsupplementationlietowardsthe

bottomendofearlierestimatesbutthisappearstobeanartifactofamuchlowermonetary

valuationofavertedmortality.WhileBehrman,AldermanandHoddinotts(2004)initialbenefit:

costratioforironsupplementationforpregnantmothersnowlooksfartoohigh,several

studiesprovideestimatesforarangeofdeliverymechanismsforironbetween6.7and23.8.

Hortonetal(2011)notethatthefigureof37forhomefortificationisprobablytoohigh

becausethestudyonwhichitisbasedassumesfarlowerdistributioncoststhanthosefoundin

otherpapers.Wealsonowhaveastandaloneestimateforzincsupplementsforchildren,2.85.

Investmentsthatreducetheprevalenceofstunting

Recallthatinourconceptualframework,thattheproximatedeterminantsofnutritionalstatus

werehealthstatusandindividualfoodintakewhichthemselveswereaconsequenceof

goodnutritionalandhealthpractices,thehealthenvironmentandfoodavailabilityatthe

householdlevel.Bhuttaetal(2008)undertakeasystematicreviewidentifyingthose

interventionsforwhichthereiscompellingevidenceoftheirimpactonmortalityandstunting

betweenbirthand36months.22

Theyarguethatthereexistsrigorousevidencetosupportthe

largescaleimplementationofthefollowinginterventions:

22Themethodstheyusetoestablishtheircriteriaofcompellingevidenceiscarefullydetailedintheirpaper.


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Interventionsthatimprovethehealthofmothers.Thisincludesironfortificationofstaples,universalsaltiodizationandironfolicacidsupplementationformothersduring

pregnancy;

Interventionsaimedatimprovingcarebehaviors.Thisincludescommunitybasednutritionprogramsthatprovideinformationonbreastfeedingandcomplementary

feeding.Italsoincludesdisseminationofchangebehaviorsthatincreasethefrequency

andeffectivenessofhandwashing.Bhuttaetalspooledanalysisofsixstudiesofhand

washingcounselingreducestheriskofdiarrheaby30percent.

Interventionsthataddressillhealthrelatedcausesofpoorpreschoolnutrition.VitaminAisimportantfortheimmunesystem.Bhuttaetalreportpooledanalysesoftrialsof

VitaminAsupplementationshowingthatmortalityinchildrensixto59monthsdeclines

by24percent;however,thereisnoimpactonanthropometricmeasures.Therapeutic

zincsupplementationreducesthedurationofdiarrheaby15to24percent.Finally,

deworminghassmalleffectsonlineargrowthbutinareaswithhighratesofintestinal

helminthiasiscanreduceanemiabyfivetotenpercent;

Interventionsthatimprovethequantityandqualityofachildsdiet.Bhuttaetalsanalysisofseveninterventionswherechildrenagedsixto23monthsreceivedfood

supplementsshowedthattheseincreasedheightforageby0.41standarddeviations a

largeincreaseinfoodinsecurepopulations.Further,theyfindthattheapplicationof

WHOsguidelinesforthetreatmentofchildrenwithsevereacutemalnutrition(which

includesreadytousetherapeuticfoods)reducesmortalityby45percent.

Havingidentifiedtheseinterventions,Bhuttaetalconstructacohortmodelthat

assessesthecumulativeimpactoftheseinterventionsinthe36countrieswhichcollectively

accountfor90percentofthemoderatelyorseverelystuntedchildrenworldwide.23

Theyfind

thatthesewouldreducestuntingatage36monthsby36percentandmortalityby25percent.

23Thesecountriesare:Afghanistan,Angola,Bangladesh,BurkinaFaso,Burundi,Cambodia,Cameroon,Congo(DR),

CotedIvoire,Egypt,Ethiopia,Ghana,Guatemala,India,Indonesia,Iraq,Kenya,Madagascar,Malawi,Mali,

Mozambique,Myanmar,Nepal,Niger,Nigeria,Pakistan,Peru,Philippines,SouthAfrica,Sudan,Tanzania,Turkey,

Uganda,Vietnam,YemenandZambia.


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Hortonetal(2010)estimatethebudgetarycostsofscalingupthesenutrition

interventionsinthesehighburdencountries.Theircostestimatesarebasedonwhatiscalled

theprogramexperienceapproach.Underthisapproach,perunitcostsarederivedfrom

actualprogramexperiencesoperatingtheseinterventionsinpoorcountries.Thecontextfrom

whichthesehavebeentakenwhethertheyarepartofoutreachprograms,standalone

interventionsorcomponentsofprimaryhealthservicesisconsideredasisthecollective

packagingoftheseinterventions.AsHortonetalstress(2010,p.10),anattractionofthis

approachisthatitproducesmoreconservativeestimatesofcostsbecauseunlikeothercosting

methodsittakesintoaccountthefactthatinterventionsmaywellnotoperateamaximum

efficiency.Theyaccountfordifferencesincostsacrosscountries(seeHortonetal,2010,Table

2.2)andassume,asdoBhuttaetal(2008),thatitmaynotbepossibletoreachallchildren;in

factHortonetalscostestimatesarebasedon80percentcoverage. Perchildcostsofthese

interventionsaregivenonTable3.18.InsubSaharanAfricaandsouthAsia,thetotalcostper

childis$96.10withnearly60percentofaccountedforbytheprovisionofcomplementary

foods.InIndia,wherethecostofsupplementaryfeedingishigher,theperchildcostis$111.62.

Wenowconsiderestimatesoftheeconomicbenefitsofimplementingthispackageof

interventions.Webeginwithstunting.InBehrman,AldermanandHoddinott(2004),benefitsof

reducedprevalenceofstuntingareconstructedbystitchingtogetherestimatesoftheimpactof

lineargrowthfailure:onattainedheightandthenmonetizingthisimpactbyapplyingestimates

oftheimpactofheightonearningsderivedfromwageregressionswhereheightappearsasan

argument;and ongradeattainmentandcognitiveskills,againmonetizingthisimpactby

applyingestimatesoftheimpactofschoolingorcognitiveskillsonearningsderivedfromwage

regressionswheretheseeducationrelatedoutcomesappearasarguments.Morerecently,

Hoddinottetal(2011)providedirectestimatesoftheimpactofstuntinginearlylifeonlaterlife

outcomes.Specifically,theyfollowuponagroupofapproximately2,300individualswho

participatedinanutritionalsupplementationtrialinGuatemalainthelate1960sandearlymid

1970s.Thesepersonsweretracedasadults,agedsomewherebetween25and42atthetimeof

interview,anddataobtainedontheirschooling,marriageandfertilityhistories,earnings,

healthandconsumptionlevels.Hoddinottetalfindthatmultiplemaligneffectsofgrowth


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failurepersistintoadulthoodincluding,interalia,lowerlevelsofpercapitaconsumption.

Treatingstuntingasendogenous,Hoddinottetalfindthatstuntingreducespercapita

consumptionbyamassive66percent.Theyemphasizethatstuntingcarriessuchhighcosts

becauseithasalargeimpactoncognitiveskillsandthattheseskillshavehighreturnsinthe

labourmarket.

Weusethisinformationasfollows.Supposestartingin2015,thefullpackageof

interventionsdescribedaboveisimplemented.Thisbenefitsacohortofindividualsbornin

2015whomweassumeenterthelabormarketatage21.Wetreatanincreaseinpercapita

consumptionduetomovingoneoftheseindividualsfrombeingstuntedtonotstuntedas

equivalenttoanincreaseinpercapitapermanentincome.Wemultiplythepointestimate,

0.66,by0.36inrecognitionofBhuttaetalsestimatethatthispackageofinterventionswill

reducestuntingby36percent.Weapplythispredictedincreaseinincome,23.8percent,to

predictedpercapitaincomesoffourcountrieswherestuntingiswidespreadandwhich

representarangeofincomelevels,Bangladesh,Ethiopia,IndiaandKenya,fortheperiod2036

to2050,thatisthefirstfifteenyearsoftheirworkinglives.Usingbothathreeandfivepercent

discountrate,weconstructthenetpresentvalueoftheseincreasedearnings.Wereplicatethis

exercisemakinganevenmoreconservativeestimateoftheincrementinincome,15percent.

ResultsarereportedinTable3.19.Usingthemostconservativeassumptionsa15

percentincreaseinincome,afivepercentdiscountrateanddatafromEthiopiayieldsa

benefit:costratioof15.0.Relaxingtheseconservativeassumptions,eitherbyusingathree

percentdiscountrateorourpointestimateofthepredictedincreaseinincome,yieldsbenefit:

costratiosbetween23.8and138.6.Thesevaryacrosscountriesbecauseofpreexisting

differencesinincomelevelsandpredictedgrowthrates.

Notethatatleastintwootherwaysthesebenefit:costratiosareconservative.First,

someoftheseinterventionssuchassaltiodizationandironfortificationofstaplesconvey

benefitstoall,notjustpregnantwomenandyoungchildren.Second,theseestimatesdonot

accountforthereductioninchildmortalitywhichweknowtobesubstantive.Blacketal(2008)

indicatethatMaternalandchildundernutritionistheunderlyingcauseof35milliondeaths,

35%ofthediseaseburdeninchildrenyoungerthan5yearsand11%oftotalglobalDALYs.


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Ascribingamonetarybenefittothisisdifficultasitentailsascribingamonetaryvaluetoalost

life,anexercisethat,asBehrman,AldermanandHoddinott(2004)describeindetail,has

myriadpitfalls.Giventhesesignificantchallenges,wedonotcalculatesuchabenefitstream,

insteadnotingthattheadditionalbenefitsofreducedmortalitylikelymeanthatourbenefit:

costratiosareunderestimates.

4.Desiderataandcaveats

Inundertakingthesecalculations,weareawareofanumberofimportantdesiderataand

caveats.Wenotefourhere:Issuesrelatingtomeasurementanddiscounting;globaltrade

regimes;gender;andresponsestothemostvirulentformsofhunger,famine.

Behrman,AldermanandHoddinott(2004)provideanexhaustivereviewof

measurementanddiscountingissuesastheyrelatetocalculationsforCopenhagenConsensus

typeexercises.Ratherthanrecountallthisindetail,weremindthereaderofseveralimportant

points.First,theinvestmentsbeingconsideredhereconveybenefitsmanyofwhichare

obtainedwellintothefutureforexample,investmentsmadetoreducestuntingdonotbegin

togeneratemonetarybenefitsuntil2036.Thismakesthemespeciallysensitivetothechoiceof

discountrate.AsBehrman,AldermanandHoddinottnotethepresentdiscountedvalueof$100

received50yearslateris$608.04withadiscountrateof1%butonly$8.52withadiscountrate

of10%andso,intheirwords,whetheraninvestmentisagreatchoiceoralousychoice

dependscriticallyonthediscountrateused. Second,ourcostestimatesarebasedonthe

marginalpubliccostsofundertakingtheseinvestments.Theyexcludeanyprivatecosts

associatedwiththesesuchasthetimecostsincurredbymothersintakingtheirchildrento

clinicstoreceivetherapeuticzincsupplementswhentheyhavediarrhea.Theyalsoexclude

distortionaryordeadweightcostsassociatedwithraisingpublicfundsfortheseinvestments.

Finally,wheretherearediseconomiesofscaleassociatedwithprogramimplementation,costs

maybeunderestimated.Thatallsaid,wenotethatforanumberofourbenefit:costestimates,

weusemultiplediscountratesand,wherepossible,useactualprogramcostsasaguidetothe

costestimatespresentedhere.Andofcoursetheseconsiderationsapplytoallinvestments

beingconsideredbytheCopenhagenConsensus,notjustthosepresentedhere.


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Webeganthesubstantivediscussionwithaconceptualframeworkthatnotedthat

hungerandundernutritionreflectthepurposiveactionsofindividualsgivenpreferencesand

constraints.Thesettingsinwhichourinvestmentsareplacedofferbothopportunitiesand

threatstothereductionofhungerandundernutrition,globalclimatechangebeinganexcellent

exampleofthelatter.Herewenotethatallourbenefit:costestimaterelyonceterisparibus

assumptionsregardingthesesettings.Improvementsinsettingswhich,forexample,increase

returnstohumancapital,wouldincreaseourestimatesofbenefitsfrominvestmentsthat

copenhagen consensus 2012 challenge paper

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