Luca Tiberti

The Impact of the Increase in Food Prices on Child Poverty and the Policy Response in Mali

Since 2006, Mali has experienced the full effects of the global food crisis, with price increases of up to 67%. This study presents simulations of the impacts of this crisis and a number of policy responses with respect to the welfare of children. The impacts are analyzed in terms of monetary (food) poverty, nutrition, education, child labour and access to health services of children. According to simulations, food poverty among children would have increased from 41% to 51%, with a corresponding rise in caloric insufficiency from 32% to 40%, while the impacts on school participation, work and access to health services would have been relatively weak. To prepare an adequate response, the government should start by identifying the poor individuals who are to be protected, based on a limited number of easily observed sociodemographic characteristics. A method of targeting these individuals is proposed in this study. However, simulations show that with targeting about one quarter of poor children would be erroneously excluded (under-coverage), while more than a third of non-poor children would be erroneously included (leakage). These identification errors, which increase in proportion with the extremity of poverty, reduce the impact and increase the cost of any public interventions. That having been said, it is important to note that leakage to the non-poor can nonetheless improve the conditions of children in terms of caloric intake, school participation, child labour and access to health services, none of which are exclusive to poor children. When targeting children or sub-groups of children by age, benefits will likely be deflected to some extent to other family members. Moreover, it is total household income, regardless of the member targeted, that determines decisions relating to child work, education or access to health services. School feeding programmes are found to be a particularly efficient policy in that they concentrate public funds exclusively on the consumption of highly nutritious foods, while cash transfers can be used by households for other purposes. Moreover, school feeding programmes are likely to have desirable effects on school participation and child labour. However, there are some caveats due to the fact that these programmes exclude children who do not attend school, the difficulty of exclusively targeting poor children and the possibility that child food rations at home will be proportionally reduced.

Macro-Micro Models

In this paper we review the joint macro-micro modeling framework. In the last twenty years, analysts have increasingly used computable general equilibrium (CGE) models jointly with microsimulation (MS) models to perform efficiency and distributive impact analysis. CGE models focus on macro and sectoral impact of policy reforms and they also capture general equilibrium effects of simulations. MS models focus on households of individuals’ behavior and are a key tool for distributional impact analysis. We detail the different approaches used and highlighting their advantages and disadvantages. We review the representative agent, the fully integrated, the top-down, bottom-up and iterative approaches.

Simulating the Impact of the Global Economic Crisis and Policy Responses on Children in West and Central Africa

The current global financial and economic crisis, which exacerbates the impacts of the energy and food crises that immediately preceded it, has spread to the developing countries endangering recent gains in terms of economic growth and poverty reduction. The effects of the crisis are likely to vary substantially between countries and between individuals within the same country. Children are among the most vulnerable population, particularly in a period of crisis. Especially in least developed countries, where social safety nets programs are missing or poorly performing and public fiscal space is extremely limited, households with few economic opportunities are at a higher risk of falling into (monetary) poverty, suffering from hunger, removing children from school and into work, and losing access to health services. This study simulates the impacts of the global economic crisis and alternative policy responses on different dimensions of child welfare in Western and Central Africa (WCA) over the period 2009-2011. It is based on country studies for Burkina Faso, Cameroon, and Ghana, which broadly represent the diversity of economic conditions in WCA countries. In order to capture the complex macro-economic effects of the crisis and the various policy responses – on trade, investment, remittances, aid flows, goods and factor markets – and to then trace their consequences in terms of child welfare – monetary poverty, hunger (caloric poverty), school participation, child labour, and access to health services – a combination of macro- and micro-analysis was adopted. The simulations suggest that the strongest effects are registered in terms of monetary poverty and hunger, although large differences between countries emerge. More moderate impacts are predicted in terms of school participation, child labour, and access to health care, although these are still significant and require urgent policy responses. Specifically, Ghana is the country where children are predicted to suffer the most in terms of monetary poverty and hunger, while Burkina Faso is where the largest deteriorations in schooling, child labour and access to health services are simulated. Among the policy responses examined to counteract the negative effects of the crisis on child well-being, a targeted cash transfer to predicted poor children is by far the most effective program. A comparison between a universal and targeted approach is also presented.

Estimating the impact on poverty of Ghana’s fuel subsidy reform and a mitigating response

The study simulates the welfare implications of the fuel subsidy reform carried out in early 2013 and the required scaling up of cash transfers to mitigate the impact of the subsidy removal on poor households in Ghana. Approximately 78 per cent of fuel subsidies benefited the wealthiest group, with less than 3 per cent reaching the poorest quintiles. We find that the removal of the fuel subsidies, by causing an increase in prices, results in a negative impact on household welfare. The negative effect is worst for the poorest group who experience reduction in their total consumption of 2.1 per cent. The simulation estimates that the poverty rate rises by 1.5 percentage points leading to an additional 395,180 individuals being pushed into poverty.

Multidimensional Poverty Indices: A Critical Assessment

This paper reviews and assesses issues involved in the measurement of multidimensional poverty, in particular the soundness of the various “axioms” and properties often imposed on poverty indices. It argues that some of these properties (such as those relating poverty and inequality) may be sound in a unidimensional setting but not so in a multidimensional one. Second, it addresses critically some of the features of recently proposed multidimensional poverty indices, in particular the Multidimensional Poverty Index (MPI) recently put forward by the United Nations Development Program (UNDP). The MPI suffers from several unattractive features that need to be better understood (given the prominence of the index). The MPI fails in particular to meet all of three properties that one would expect multidimensional poverty indices to obey: continuity, monotonicity, and sensitivity to multiple deprivation. Robustness techniques to address some of the shortcomings of the use of such indices are briefly advocated.

Are cash transfers a realistic policy tool for poverty reduction in Sub-Saharan Africa? Evidence from Congo-Brazzaville and Côte d’Ivoire

This article uses evidence from two contrasting African countries, a middle-income oil producer (the Republic of Congo) and a low-income country (Côte d’Ivoire), on the potential role of cash transfers as instruments for poverty reduction and human development. Quantitative simulations of the targeting efficiency, impacts, cost, cost-effectiveness and affordability of different cash transfer options are combined with analysis of political and administrative feasibility. The analysis finds that cash transfers would have more impact on monetary poverty reduction than on human development, while a major practical challenge is to target efficiently in a context of mass poverty. Large-scale cash transfers could be financed domestically in Congo, but this is unlikely in Côte d’Ivoire, and political support is weak in both countries.

Simulating the Impact of the Global Economic Crisis and Policy Responses on Children in Ghana

Like many countries in sub-Saharan Africa, Ghana is experiencing the impact of the global crisis and the uncertain economic outlook. Indeed, as Ghana’s economy is among the most open in Africa, it is expected that the country has been and will continue to be severely affected by the crisis, although strong export prices of its main exports (gold and cocoa) may at least partially counteract the effects associated with the crisis. The main goal of this paper is to understand the potential impacts of the 2008/9 global crisis on different dimensions of child poverty (monetary, hunger, school participation, child labour and access to health services) in Ghana and to support the policy-maker in designing the most appropriate policy response to counteract the negative effects of the crisis. As timely data are not available, a combined macro-micro economic model to predict the impact of the global crisis on children was developed. Simulations suggest that the financial crisis would increase monetary poverty and hunger across all regions of Ghana, eroding many of the gains made over the past few years. Indeed, in comparison with the year preceding the crisis, instead of a reduction of four percentage points in child monetary poverty in 2011 predicted in the absence of crisis, the simulations indicate a 6.6 percentage point increase, with a continuous increasing pattern over the period of study. The global crisis is also predicted to severely deepen hunger among children, which is simulated to increase up to 6.6 percentage points in 2011 beginning with a sharp increase already in 2009. For both monetary poverty and hunger, the impact of the crisis differs across all regions, with the Eastern, Volta and Greater Accra regions predicted to be the most affected. Children’s participation in schooling and labour, as well as their access to health services, are forecast to be much less affected by the crisis, although it is found to reverse predicted increases in enrolment and health access (with substitution toward more modern types of health services) and forecasted reductions in child labour. Finally, alternative policy options have been simulated: a cash transfer programme targeted to poor children is found to be generally more effective in protecting children than food subsidies. Indeed, with a total budget equivalent to 1% of 2008 GDP, a cash transfer – equivalent to an individual annual amount of 19.8 Cedis – would cut the predicted increase in monetary poverty by over two percentage points in 2011. Although Ghana might be in a position to rapidly implement a cash transfer programme building on the existing Livelihood Empowerment against Poverty (LEAP) programme, other interventions (or mix of policies) might be more cost-effective in the short run. A combination of a universal or regionally targeted cash transfer programmes for children aged 0 to 5 years old, together with a school-feeding programme in poorer regions, might represent an effective way to intervene quickly to improve child well-being.

Rural Policies, Price Change and Poverty in Tanzania: An Agricultural Household Model-Based Assessment

Exogenous shocks to farmers’ consumption, production and labour market decisions are rarely considered accurately. For farm households, under labour market imperfections, such decisions are often interlinked. This calls for non-separable agricultural household models. According to this framework, second-order (or behavioural) effects include a direct (i.e., supply or demand reactions due to an exogenous shock) and an indirect (i.e., supply or demand adjustments to the endogenous variations in the shadow wage generated by the exogenous shock) component. Under large price changes or following structural interventions, such as those concerning land redistribution or mechanization practices, neglecting such second-order effects on consumption and production can bias the final impact on household welfare. The main objective of this study is thus to develop a robust and comprehensive tool to evaluate the effect on household welfare of different agricultural policies in Tanzania and food price changes. A two-stage estimation strategy is adopted: the shadow price of labour is first estimated and then used to estimate production and demand systems as well as labour market functions. These models are subsequently used to simulate the effect on household welfare of a hypothetical 40% increase in the price of cereals and other crops and a hypothetical 10% increase in the hectares of arable land and in the use of ox-ploughs. The results are finally compared with the case in which a separable model is adopted.

Economic Effects of Migration on the Left-Behind in Cambodia

Abstract Using propensity score matching, this study examines the effects of migration on various indicators of household wellbeing in Cambodia. The results indicate that migration would reduce poverty headcount rate by 3–7 percentage points and decrease the depth of poverty. Migration is also found to reduce by 5–10 per cent the hours worked by members left-behind. The impact of migration on labour participation may be, however, vulnerable to unobservable factors. Nevertheless, the study suggests that important heterogeneous effects which differ from the average impact exist. The analysis is conducted separately by internal and international migration.

Fiscal Space and Public Spending on Children in Burkina Faso

Despite high growth rates in recent decades, Burkina Faso is still a poor country. The government acknowledges the need for a stronger commitment to reach the Millennium Development Goals (MDGs), particularly regarding the reduction of poverty. At the same time, the Burkinabe budget deficit has grown in recent years in response to various crises which have hit the country. There are strong pressures to rapidly reduce this budget deficit, but there are active concerns about how this will be achieved. The country thus faces difficult choices: how to ensure better living conditions for children, attain the millennium goals and ensure they have a better future in the present budgetary context?To answer this question, three policy interventions were identified: (i) an increase in education spending, (ii) a school fees subsidy and (iii) a cash transfer to households with children under the age of five. The same total amount is injected into the economy in each of the three cases, facilitating comparison between the three scenarios. The discussions also made it possible to identify the three financing mechanisms that appear most realistic: (i) a reduction in subsidies, (ii) an increase in the indirect tax collection rate and (iii) an extension of the timeframe to reduce the public deficit to ten years rather than five.The results indicate that increased public education spending helps raise school participation and pass rates, thus increasing the supply and education level of skilled workers, leading to a reduced incidence and depth of both monetary and caloric poverty.School fees subsidies have more differentiated effects on education: they promote children’s entry into school to a greater degree, but are less effective at inducing them to pursue their studies. Finally, the supply of skilled workers increases slightly, but their average level of education is lower than in the reference scenario. This type of intervention has a beneficial impact on poverty, greater than under increased public education spending.Cash transfers have a limited impact on educational behaviour, and thus on the supply of skilled workers, but substantially reduce the incidence and depth of poverty.The results are qualitatively similar under each financing approach. In sum, if the objective is to achieve improved education and economic performance, the best intervention appears to be to focus on increased public education spending. However, if reducing child poverty is prioritized, it is cash transfers to families that appear more suitable. Regardless of the intervention considered, the most suitable financing mechanism appears to be a temporary increase in the public deficit, because it is accompanied by a smaller negative effect on the quality of life of the most destitute.