Food Aid Effect Agricultural Production Social Policy Essay

Some contend that nutrient assistance dampens agricultural end product and has negative effects on the economic system of low-income states ( Abdulai, Barrett, & A ; Hoddinott, 2005 ) , while others argue that nutrient assistance benefits nutrient insecure states ( Shaw & A ; Singer, 1988 ; Hoffman, Gardner, Just & A ; Hueth, 1994 ) . This argument has lingered since the 1950s ( Lowder, Southgate, & A ; Rodriguez-Meza, 2004 ) , and here I will analyze this inquiry farther via fixed effects theoretical account of domestic nutrient production to find: 1 ) how does nutrient assistance affect domestic agricultural production, and 2 ) is there any degree or circumstance in which nutrient assistance should be used. Datas from nutrient insecure, low-income states in the Caribbean and Latin America will be used because these parts exhibit rich agricultural resources, but have socio-cultural and other climatological shortages that keep domestic nutrient production depression ( Shapouri, Rosen, Meade & A ; Gale, 2009 ) .

Sing how nutrient assistance remains a cardinal safety tool to increase the nutrient supplies of low-income states ( Rosen & A ; Shapouri, 2003 ) , so its continued use means short-run benefits causes long-run injury to the nutrient security of low-income states. If true, so it calls into inquiry the hereafter of nutrient assistance as an instrument for bettering nutrient security. This inquiry is peculiarly of import for Latin American and Caribbean states because there are long-standing socio-cultural and climatological grounds ( e.g. corruptness, hurricanes, and monolithic deforestation are relentless jobs stymie meaningful agricultural development ) that make alternate agencies for set uping nutrient security and extenuating nutrient dazes unlikely ( Watts & A ; Bohle, 1993 ) .

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Background

This subdivision provides a brief contextual overview of nutrient assistance and nutrient security. It besides explains why understanding the potentially depressive economic effects of nutrient assistance on domestic nutrient production are of import. Additionally, a brief historical overview is provided and a ground is given for why certain Latin American and Caribbean states were included for survey in this survey.

First, nutrient security refers non merely to holding an equal supply of nutrient, but besides means that “ all people at all times have both physical and economic entree to basic nutrient. This requires non merely plenty nutrient to travel about. It requires people to hold ready entree to nutrient ” ( UNDP, 1994, p. 22 ) . Here an equal supply of nutrient refers to the handiness of adequate nutrient to run into the minimal day-to-day energy demands ( MDER ) of a individual as deemed by the Food and Agricultural Organization ( FAO ) of the United Nations ( Svedberg 2000 ) . It besides refers to holding a nutrient supply of equal nutritionary diverseness of saccharides, protein, fats, micro-minerals, and vitamin foods to prolong wellness ( Campbell, 1991 ) .

Food security is an of import factor in a state ‘s overall economic development. Without equal and sustained nutrition, the public affected by nutrient insecurity will hold diminished economic capacity. This theory is based on the Kuznets contention that “ unfairness in the distribution of income would lift and fall in the long-term development procedure, because of labour displacements from low- to high-productivity and the moral force of human capital accretion ” ( Bourguignon & A ; Dessus, 2009, p. 40 ) . It follows so that for labour to take part in higher productiveness activity, which would convey higher rewards, so foremost agricultural development would hold to be gained, which one time sufficiently productive would liberate more workers to prosecute in other more extremely productive signifiers of labour and so turn the overall economic system ( Kuznets, 1955 ; Todaro, 2008 ) . Therefore, relieving nutrient insecurity in low income states helps to cut down poorness and convey approximately economic enlargement ( Jenkins & A ; Scanlan, 2001 ) . This is the economic promise behind the issue of nutrient security.

Food assistance remains of import because there are structural and political restrictions present in many low-income states that make higher agricultural production degrees un-foreseeable. Eliminating, or badly diminishing, the usage of nutrient assistance in the close hereafter does non look plausible. Understanding the economic impact of nutrient assistance therefore becomes really of import issue for nutrient security plan implementers ( Rosen & A ; Shapouri, 2003 ) . The modern country of nutrient assistance, get downing with the United States ‘ Food for Peace Program in 1954, codified under the Public Law 480 of that same twelvemonth, marked the beginning of large-scale nutrient assistance plans for states in demand around the universe. Although nutrient assistance can be within the boundary lines of a state ‘s ain state, i.e. nutrient casts in the United States, here the term refers to “ assistance provided by donor authoritiess and human-centered bureaus to turn to the jobs of hungriness, nutrient insufficient, and malnutrition ” ( Maxwell, 2009 ) . A common unfavorable judgment about nutrient assistance centres around how frequently authoritiess have used it in ways that so frequently has small to make with alleviating hungriness or human-centered concerns.

Specifying nutrient assistance more exactly is of import so as to more accurately assess the wider economic deductions of its usage. Originally in 1970s the construct of nutrient security concerned itself with whether certain states had the ability to supply plenty nutrient to its people. Policy experts were focused chiefly with forestalling or minimising nutrient monetary value fluctuations. As a consequence, the nutrient alleviation attempts of that clip took the signifier of direct financial assistance to states to subsidy nutrient supply shortages and/or plans chiefly involved monolithic nutrient repositing ( IFPRI, 2002 ) . Partially in response to concerns about inefficient usage of nutrient assistance in old decennaries, the policy implementers developed steps to guarantee nutrient alleviation attempts non merely more successfully distributed the nutrient to hapless states but besides achieved betterments in existent quality of steps and in wellness ( Dilley & A ; Boudreau, 2001 ) .

Besides from functioning international human-centered nutrient demands, nutrient assistance encompasses two nucleus characteristics that make it distinguishable from other signifiers of aid: 1 ) international sourcing, and 2 ) concessional resources, in the signifier of nutrient, or for the proviso of nutrient ( Barrett & A ; Maxwell, 2005 ) . This means that nutrient comes to a recipient state either in the signifier of direct nutrient alleviation shipped from a foreign state when internationally sourced. When non, the assistance comes in the signifier of concessional resources, and the foreign state earmarks money that either goes to the purchase of nutrient to be shipped straight to the state in demand, or sends the money to that state, which in bend uses the money to subsidy nutrient monetary values or administer nutrient straight to its people. These signifiers of sourcing complicate the nutrient assistance image and how it could potentially impact domestic nutrient production. Direct nutrient assistance ( i.e. distribution of existent nutrient ) peaked in 1965, when it constituted 22 per centum of international assistance flow. Now the sum is less than 5 per centum ( Barrett & A ; Maxwell, 2005 ) . Now nutrient assistance soon operates as of import in footings of its fringy impacts in state of affairss of nutrient insecurity. Food assistance as existent nutrient is non the primary mechanism for this signifier of aid. Alternatively, nutrient assistance maps more significantly as support mechanisms earmarked for nutrient security alleviation among affected low-income states. Because nutrient assistance now more so involves the usage of hard currency transportation, how it impacts domestic nutrient assistance differs.

When measuring whether a state needs nutrient assistance, low domestic agricultural degrees are normally present. The indicants of long-run nutrient security jobs in a state include an inability to keep per capita nutrient usage degrees from twelvemonth to twelvemonth and an inefficient ability to run into mean minimal nutritionary demands. Thirteen Sub-saharan African states and two Latin American states exhibited these marks in 2002. In other states the degree of nutrient insecurity is non so unstable. The most common nutrient insecurity feature is nutritionally unequal nutrient ingestion among the county ‘s hapless. States with high unfairnesss in income distributions tend to hold more terrible nutrient insecurity jobs. Harmonizing to 2002 estimations, in 50 of the 70 states studied, more than 10 per centum of the population did non hold economic entree to the nutritionary demand. Nutritional jobs are more common among adult females and kids. Harmonizing to the United Nations International Children ‘s Emergency Fund ( UNICEF ) , 6 million kids under age 5 dice each twelvemonth because of hungriness. FAO reports that 50-60 per centum of kids ‘s deceases in developing states is straight or indirectly related to hungriness ( Rosen & A ; Shapouri, 2003 ) .

Food assistance comes to recipient states by and large in three signifiers. There is plan nutrient assistance – subsidized or free nutrient given to the authorities. The 2nd sort of nutrient assistance is project nutrient assistance – grants normally given to field-based undertaking in countries of chronic demand. The undertakings are normally sponsored by non-governmental organisations ( NGOs ) or international authorities organisations ( IGOs ) like the United Nations ‘ World Food Programme or the Earth Institute. The NGOs receive either nutrient to straight administer or hard currency support for the deployment of food-for-work undertakings. The 3rd class is exigency nutrient assistance to populations or states enduring from natural catastrophes or utmost hardships. It is of import to underline the rarity of existent nutrient transportations from giver states to low-income state in order to understand the potentially harmful effects that nutrient assistance may hold on the agricultural production of low-income states ( Maxwell, 2009 ) .

Different sorts of nutrient assistance have different effects. A well-managed exigency nutrient plan can really take to an addition in nutrient production. A ill managed nutrient assistance plans can hold opposite effects. In this instance, the nutrient assistance ends up being eaten by people who are non at hazard. Either they are able to buy nutrient or they can turn their ain nutrient. Additionally, the displacement from existent nutrient contributions to hard currency payment has added new economic deductions to the nutrient assistance received by low-income states ( Barrett, 2001 ) .

Although rich in agricultural resource, there are many states in that part which are nutrient deficient. For this survey informations from Argentina, Ecuador, Panama, Belize, El Salvador, Paraguay, Bolivia, Grenada, Peru, Brazil, Guatemala, St. Kitts and Nevis, Chile, Guyana, St.Lucia, Colombia, Haiti, St. Vincent and the Grenadines, Costa Rica, Honduras, Suriname, Cuba, Jamaica, Uruguay, Dominica, Mexico, Venezuela, Dominican Republic and Nicaragua will be included. First, information from these states are included in the survey because these represent all the developing states from that part of the universe that is considered low-income ( World Bank, 2009 ) . Second, the methods for this survey necessitate a high figure of states. Finally, the job of nutrient insecurity in many of these states is long-run and has a history that holds lessons in other countries of nutrient security betterment ( Shapouri, Rosen, Meade & A ; Gale, 2009 ) .

LITERATURE REVIEW

This subdivision explores some of the more outstanding literature that examines the economic effects of nutrient assistance on domestic nutrient production in low-incomes nutrient insecure states. The scholarship on the topic shows a deficiency of consensus about nutrient assistance ‘s general economic impact on domestic nutrient production.

Food assistance and agricultural development operate within the scheme of the nutrient security model in sometimes opposing ways. Food assistance does function the immediate intent of extenuating nutrient wants for about 1 billion people in the universe. Food assistance besides continues to be the cardinal safety cyberspace instrument for the international community to increase nutrient supplies of low-income states, unable to run into nutrient ingestion demands through their ain agricultural end products ( Rosen & A ; Shapouri, 2003 ) . Meanwhile, nutrient insecurity is increasing ( Atkins & A ; Bowler, 2000 ) , and those using the nutrient security model demand to besides understand if nutrient assistance itself might be lending to the job of relentless nutrient insecurity.

There is some antidotal grounds of nutrient assistance ‘s possible negative effects. For illustration, between the early 1970s and the mid-1980s, sub-Saharan African had its per capita nutrient production bead dramatically. Despite some recovery since so, per capita nutrient production in sub-Saharan Africa today is still about 20 % below the degrees ob­served 30 old ages ago. This diminution coincided with the addition of nutrient assistance flows by a factor of five. The subsequent autumn in nutrient production after the rise in nutrient assistance led some to believe that nutrient assistance leads to worsen in domestic agricultural production ( Abdulai, Barrett, & A ; Hoddinott, 2005 ) . Since the beginnings of wide-scale nutrient assistance alleviation in the 1950s persistent concerns have existed about how nutrient assistance later leads to depressive effects on nutrient monetary values for domestic manufacturers. Several instances in sub-Saharan Africa in recent old ages provide empirical grounds for this concern ( Barrett & A ; Maxwell, 2005 ; Schultz, 1960 ) . At the family degree the concern is that nutrient assistance leads to a decrease in labour engagement. The extract of nutrient assistance leads to decrease of force per unit area at the family degree to trust on their ain subsistence agriculture attempts. Overall, the concern is that nutrient assistance creates deterrences on the domestic micro-economic degree non merely in footings of labour engagement, but besides overall domestic agricultural production as a consequence. Furthermore, critics contend that nutrient assistance creates deterrences, instead than incentives, for recipient states to re-organize and spread out agricultural production. Finally, critics worry that monetary values and trade policies become deformed and biased against domestic agribusiness ( Mellor, 1988 ) .

At the same clip, harmonizing to Rosen & A ; Shapouri, domestic nutrient production and imports constitute the chief constituents of nutrient handiness ( 2003 ) . Domestic and imported nutrient productions do non run into ingestion demands. Despite many attempts to increase the agricultural end products of nutrient insufficient states, nutrient insecure states still need to trust on nutrient assistance, instead than on programs for increased agricultural production, to assist do up this nutrient ingestion spread ( Rosen & A ; Shapouri, 2003 ) . The inquiry remains whether nutrient assistance can function as an engine for agricultural growing among low-income states. Shaw and Singer ( 1988 ) have argued that nutrient assistance can supply the receiver authoritiess with the resources to subsidise higher monetary values for local nutrient manufacturers, without pricing the hapless consumer out of the market, during a passage period while employment/incomes are generated. Barrett extends the statement farther by stating that “ nutrient assistance represents an in-kind transportation from food-surplus, high-income givers to food-deficit, low-income receiver ” ( Barrett, 1998, p. 566 ) . Food assistance thereby provides resources that can possibly assist excite development. He bases his statement on Timmer ‘s contention that a permeant and unvarying facet of the development procedure is a rapid addition in per capita agricultural production that accompanies or precedes general economic growing ( Timmer, 1992 ) . The empirical grounds about nutrient assistance to low-income states since the 1950s long pillows this contention, Abdulai, Barrett, & A ; Hoddinott ( 2005 ) straight assert that “ nutrient assistance does non look to hold created deterrences to local agricultural production, labour supply, investing, or common support ” ( p. 1700-1 ) .

Finally, there is the long-term ( circa twenty-year ) effects study from Siamwalla and Vald & A ; eacute ; s ( 1980 ) on nutrient productiveness are neither economically nor statistically significantly different from nothing. On norm, nutrient assistance seems to hold neither a stimulative nor contractionary effects on receiver nutrient productiveness in their survey. Although the limited available empirical grounds suggests that the cardinal inclination across receivers is for nutrient assistance to hold negligible effects on per capita nutrient production, this is non an statement that nutrient assistance can non help development ( Siamwalla & A ; Vald & A ; eacute ; s, 1980 ) . However, most grounds suggests that agricultural development in food-deficit, low-income states depends chiefly on prudent, market-friendly policies combined with technological alteration and capital accretion that output sustainable betterments in labour productiveness. Food assistance seems non to lend materially to capital accretion, policy reform, or technological alteration ( Pl & A ; uuml ; mper & A ; Neumayer, 2009 ) .

In drumhead, research workers have yet to come to understanding on the overall effects of nutrient assistance on domestic agricultural production. In portion, the inconclusive consequences of their surveies may be owed to the inability for these research workers to roll up adequate informations for the production of substantial consequences from their probe. The design and range of the survey is designed to assist get the better of such research restrictions.

Datas

This subdivision describes the informations used from FAOSTAT, the World Bank ‘s Data Set of World Development Indicators and the World Food Programme ‘s Food Aid Information Systems to bring forth a fixed consequence arrested development theoretical account of domestic nutrient production. Food assistance information from the World Food Programme and the World Bank will be used in the fixed consequence theoretical account. The information on nutrient production from the FAOSTAT will be used in the theoretical account. The information on engineering, country, output et al. are used here to supply comprehensive descriptive image of the nutrient security for the states of Latin America and the Caribbean included in this survey. After supplying the descriptive statistics from these informations beginnings, the fixed consequence theoretical account will be used the extent of nutrient assistance ‘s consequence on domestic agricultural production. The consequences can so be compared to the descriptive statistics about agricultural capacity and the nutrient spreads of the survey ‘s states to measure with the consequences of the fixed consequence arrested development theoretical account are logically consistent with the descriptive statistics provided.

Domestic nutrient production and imports of nutrient are the chief constituents of nutrient handiness. Assessment of how nutrient production and imports affect nutrient security, nevertheless, is non so easy ( Atkins & A ; Bowler, 2000 ) . Domestic production for the basic trade goods is the merchandise of output and country. The combination of fertiliser usage, labour, and engineering determines output. Area, the sum of land used for agribusiness, is determined by the sum of net returns ( net income for the merchandising of nutrient ) expected and preexistent land restraints. The merchandise of output and country determines the sum of domestic nutrient production generated. Commercial nutrient imports are made up of net foreign exchange earning and nutrient import monetary values. When nutrient handiness is non high plenty to run into demand, increasing domestic agricultural production becomes indispensable to bettering a state ‘s ability to feed its people. Deformed policies, limited resources, low input usage, and the low acceptance rate of engineering are chief factors restraining outputs for some states in this part ( Rosen & A ; Shapouri, 2003 ) . Therefore, nutrient security concerns itself with increasing domestic agricultural outputs. Understanding how nutrient assistance may offset these attempts becomes important when seeking to maximise the nutrient handiness.

The FAOSTAT Data Set: FAOSTAT is the multi-language database of the Food and Agriculture Organization of the United Nations put online and made accessible to the general populace in 2002. It is a comprehensive database incorporating more than 1 million time-series records from over 210 states and districts. Datas about agricultural inputs and end products, nutrient assistance and nutrition is available. It besides contains geological and ecological informations about forestry, piscaries and land usage. Last, the FAOSTAT provides basic population informations. ( FAO 2009 ) . This survey includes the undermentioned agricultural and economic information from this information set: engineering, country, value of agricultural production, nutrient import monetary values, output, production, net return, entire ingestion, and minimal day-to-day energy demands ( MDER ) .

Technology is a variable measured in footings of agricultural machinery, normally tractors, used per 100 square kilometres of cultivable land in a state. Area is the hectares of land harvested. Output is the output of agribusiness per hg or hectare. Production is the sum of nutrient produced in metric dozenss per twelvemonth. The value of agricultural production is the gross income of agribusiness before the cost of production is subtracted in order to deduce the net return from production. Food import monetary values from FAOSTAT are measured in the local currency of the state, and are besides available in dozenss per twelvemonth imported into the state. This information is categorized into general classs of cereal, wheat, pulsations, dairy and more. The information can besides be disaggregated into peculiar nutrient materials, such as melons and Prunus dulciss. The same degree of coarseness of information is available for production, value of agricultural production, output and country harvested. Information in these classs are available both in aggregated and in disaggregated signifiers ( FAO 2009 ) .

The minimal day-to-day energy demand ( MDER ) acts as a step of the baseline sum of energy needed to transport out basic organic structure operation, which includes low degrees of physical activity. The MDER varies by state and from twelvemonth to twelvemonth depending on the gender and the age of the population ( WFP 2009 ) . The MDER is based on the human energy demands as calculated by FAO and the World Health Organization ( WHO ) in 2004, and the new criterions of Body Mass Index released in 2006 by the WHO. The MDER establishes a threshold to gauge the per centum undernourished in a state ‘s population. Adjustments to the MDER alterations prevalence of people estimated to be undernourished. When extrapolated for a state ‘s whole population, the MDER becomes a leaden norm based on the different gender-age groups in the population. It is expressed as Calories ( kcal ) per individual per twenty-four hours ( FAO 2009 ) .

The World Bank Data Set of World Development Indicators ( WDI ) : The WDI is an online multilingual database incorporating informations set and statistical appraisal tool of economic development advancement for 210 states get downing from 160. Most of the information is available on a subscription footing or via those associated with big establishments, like a university. Data is available in two twelvemonth lagged increases, i.e. if hunt is done in 2008, so the most current informations would be available for 2006 ( World Bank 2009 ) . This survey includes the undermentioned agricultural and economic information from this information set: 1 ) labour, 2 ) fertiliser ingestion, and 3 ) foreign credits and grant. The labour variable histories for the sum of the population working in agribusiness. The figure for each twelvemonth is derived by multiplying per centum of entire population employed by the per centum of the population of the population specifically employed by agribusiness and so multiplying that figure by the sum of the state for that twelvemonth. Fertilizer ingestion information is available from the WDI both as ingestion per hectare in 100 gm increases and as entire metric dozenss for the twelvemonth. Foreign credits and grants histories from the WDI are non disaggregated into types. Alternatively, the sum of foreign assistance earmarked for nutrient alleviation is calculated by taking this entire sum and multiplying it by estimations for the per centum of assistance now traveling specifically towards nutrient alleviation, which is no more than 5 % ( Maxwell, 2009 ) .

Other Types of Data: Population figures are all acquired from the WDI information set. Datas from the World Food Program ‘s Food Aid Information Systems is besides used. It provides breakdown by type ( plan, undertaking or exigency ) for the sums ( in dozenss ) of nutrient assistance given to each state. Datas from the Food Aid Information Systems is merely available get downing in 1988. Datas from earlier old ages from the WDI on entire foreign recognition and grants will be used historical, and so nutrient assistance estimations will be derived utilizing the norms from other research beginnings for the per centum of nutrient assistance from entire foreign grants in earlier old ages ( this estimate of nutrient assistance per centum of entire foreign assistance is calculated by Barrett in Food Aid: After Fifty Years ( 2005 ) ) .

Addressing Data Restrictions: The information set used in this survey has some restriction in footings of accounting for administration, ecological impacts on agribusiness ( i.e. monolithic de-forestation or resources shortages that doing high agricultural productiveness instead unlikely ) , handiness and use owing to want in instruction, cultural barriers, and other exogenic dazes, like universe nutrient monetary value fluctuations ( Riely, Mock, Cogil, Bailey, & A ; Kenefick, 1999 ) . However, this analysis of the nutrient security model concerns itself merely with turn toing the impact of nutrient assistance on agricultural domestic production. As such, the informations used in this survey is most concerned with bring forthing accurate steps of the inputs involved in bring forthing the entire sum of nutrient available for ingestion within a low income state. While of import, issues of handiness and use, nor even nutritionary assortment, would hold a damaging impact in measuring the survey inquiry ( Menon, et al. , 2007 ) , particularly within the context of a fixed effects arrested development theoretical account.

Some countries in demand of better measuring are the computation for entire non-real nutrient assistance traveling to low-income states and the appraisals of engineering used in the production of agribusiness. The engineering variable is of import because the bulk of the population in less developed states derives their income from agricultural production. Technology acceptance additions production and thereby their income, but acceptance rates are extremely variable ( Mellor, 1988 ) . Development economic experts postulate that factors such as the recognition restrictions, information dissymmetries, fright of hazard, deficiency of suitableness for little, subsistent agriculture, deficiency of labour, and hapless coordination attempts are reflected in the acceptance rates of engineering ( Gershon, Just, & A ; Zilberman, 1985 ) . Because these barriers to engineering acceptance are still so ill understood, the impact of engineering of agricultural output is ill understood. Additionally, although information is available on the rates of fertiliser usage in these states, measurings about the efficiency of its usage is losing ( Shaw & A ; Singer, 1988 ) .

Finally, there is besides deficiency of information about how the agricultural labour engagement rate is calculated, particularly sing the high rate of subsistence farming present in many of these states. The existent part of this sort of labour to agricultural production figures available is difficult to quantify. First, agricultural production steps do non account for subsistence agriculture measures good. Second, these labour figures do non separate between parttime or full-time agriculture attempts, and so the input effects of labour to give is besides difficult to gauge ( Syrquin, 1986 ) . These are concerns for farther survey. However, in footings of measuring how nutrient assistance consequence domestic agricultural production, there should be small consequence. Not because these informations restriction are non of import, but because this assessment concerns oppugning whether nutrient assistance really does hold a depressive consequence on domestic agricultural production to a statistically important consequence. It would be difficult to conceive of how nutrient assistance with its fringy consequence would be significantly deciding in this country.

Method

This subdivision provides an overview of the fixed effects arrested development theoretical account used to gauge the consequence of nutrient assistance on domestic nutrient production for the Latin American and Caribbean states included in this survey. First, there is fixed effects arrested development of nutrient assistance as a determiner of domestic nutrient production degrees. Second, there is a average divergence method is used to extinguish Army Intelligences and demo the effects of nutrient assistance on domestic nutrient production over clip.

Model Overview: To estimate the consequence of nutrient assistance on domestic agricultural production for low income states in Latin America and Caribbean, a fixed effects regression theoretical account of panel informations is used: dfoodit = ? T + ? xit + ? zi+ ? i+ + ? it.. The dependant variable, dfoodit, is domestic nutrient production where i=country and t=time. xit represents the independent variable in the theoretical account, nutrient assistance. ? T is an intercept for each point in clip, and? it functions as the mistake term for each single point in clip for each state ( Allison, 2005, p.2 ) .

The fixed consequence method is used here because the usage of the ordinary least squares methods would ensue is the calculator? being biased and inconsistent because of the skip of this unseen variable. However, with? one = z’i? , as is the instance with the fixed effects, the theoretical account contains all these unobservable effects and gives the mean of the nutrient insecurity for this group. This is called the fixed effects attack. The variable? one operates as a group-specific changeless term, intending that the term does non change over clip ( Greene, 2003, p. 285 ) . The cardinal construct underlying the fixed effects theoretical account is that the unseen variable, zi, is time-invariant. Consequently, “ any alterations in the dependent variable must be due to influences other than these fixed features ” ( Stock & A ; Watson, 2003, p.290 ) .

By utilizing a fixed effects theoretical account, the possible job of omitted variable prejudice owing to the heterogeneousness of inter-country fluctuation of nutrient security is eliminated ( Budig, 2001, p. 210 ) . Alternatively accent now is given to the fluctuation of nutrient insecurity over clip, non by state, and the effects of nutrient assistance over clip on domestic nutrient production can be more closely studied. The fixed consequence theoretical account allows for the survey of the cause for alteration in the degree of domestic nutrient production within a state ( Kohler & A ; Kreuture, 2005, p. 245 ) . Because nutrient assistance is correlated with nutrient security the equation should be differenced to extinguish Army Intelligences. After differencing the clip and entity fixed arrested development theoretical account, the alteration in the domestic nutrient production from twelvemonth t-1 to t will be had ( Wooldridge 2003, p. 432 ) . Using a simple differencing of the fixed consequence arrested development at t=1 from t=2 would work instead easy, but here a clip period of more than forty old ages is being examined.

In this instance, deducing the difference over clip would affect utilizing the average divergence method. Dummy variable could be used here, but it requires a heavy sum of computational power, which this method avoids. The average divergence methods plants foremost by ciphering the agencies over for the independent ( nutrient assistance ) and dependent variables ( domestic nutrient production ) ( Allison, 2005, p. 6 ) :

Here Ni is the observation per state for each twelvemonth. The 2nd measure is to deduct the state mean from the ascertained value for each twelvemonth:

Then, for the last measure, reasoning backward dfoodit* on x*it, plus the variable represent the consequence of clip. The consequences of analysis should so necessitate to be tested for statistical significance and appraisal dependability via trials of heteroskedasticity and autocorrelation ( Gujarati, 2003, p. 644 ) . The most common trials for heteroskedasticity would be the Breusch-Pagan Test and the White trials. It would besides be advisable so to utilize a restricted F trial to prove whether utilizing a naive OLS theoretical account or Hausman trial to find whether a random consequence theoretical accounts would hold produced more efficient estimations ( Gujarati, 2003, p. 643 ; Wooldridge, 2005, p. 431 ) .

Using the fixed effects theoretical account, nevertheless, does present certain restrictions and drawbacks. If there are excessively many dummy variables there may be a grades of freedom job. Having many variables would besides increase the likeliness of multicollinearity. This is non the instance in this theoretical account, since the figure of variables in the theoretical account is low and the figure of observations in the theoretical account is big ( more than forty old ages of observations for 29 states ) . Most significantly, utilizing average divergence method eliminates the demand to utilize dummy variables. However, the silent person variable job is non the lone concern. A fixed effects theoretical account is unable to account for time-invariant features, like civilization or clime. It besides may non be true that the mistake term, ? it, is usually distributed, i.e. ? it ~ N ( 0, ? 2 ) . The cross-sectional nature of I and the clip series nature of T for the error term is what poses the menace to normal distribution ( Gujarati, 2003, p. 646 ) .

Although fixed effects arrested development mold does present these possible drawbacks, for this peculiar information set and for the peculiar inquiry here being examined utilizing a fixed effects theoretical account allows for a closer scrutiny of intra-country effects over clip without the confusing factors of inter-country effects in the scrutiny of whether nutrient assistance has a depressive consequence on domestic nutrient production for low income states of Latin America and the Caribbean. Since the unobservable variable of nutrient insecurity among these states is instead inactive over clip and make correlative with nutrient assistance bringing, the fixed effects theoretical account allows for the factorization in of this heterogeneousness and allows for efficient estimations in visible radiation of the omitted variable prejudices that likely exist in between states ( Allison 2005, pp. 2, 4 ) .

Policy IMPLICATIONS

Questions about the benefits of nutrient assistance in relieving nutrient insecurity issues in the long term still exist, despite more than forty old ages of probe about the affair. The purpose of this survey is update the argument and convey more attending to how nutrient assistance affects nutrient security in Latin American and the Caribbean. Too frequently exigency nutrient crises occur that require the usage of nutrient assistance. Just the prevalence of these sorts of state of affairss entirely will guarantee the presence of nutrient assistance for old ages to come. The greater policy deductions of this survey present themselves in two ways. First, nutrient security analysts would be able to better measure the effectivity of their nutrient security steps and, more significantly, be able to measure if the usage of nutrient is good or does more injury than good. Second, nutrient security analyst would be able to utilize these determination as the basis for farther geographic expedition of how to better measure nutrient security in low-income states of Latin America and the Caribbean, which faces peculiar socio-cultural and climatological shortages non found among the more commonly studied states of sub-Saharan Africa, while at the same clip widening work already done in the field.

Although nutrient assistance and its deductions for economic development is this survey ‘s chief focal point, the deductions of this survey consequences besides hold possible for farther geographic expedition in the field of human ecology, ecology and political scientific discipline. Certain factors exist in Latin America and the Caribbean that would profit by farther geographic expedition of how nutrient assistance affects domestic nutrient production by these other subjects.

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