33 pol brf food models en

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Po l icy Br ie f No 33

F o o d S e cu r it y M o d e ls by

Samir Jrad

Bashar Nahas

Hajar Baghasa

Damascus, August, 2010


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Ta b l e o f Co n t e n t s

S u m m a r y ................................................................................................................ 1 1. B a c k g r o u n d ....................................................................................................... 1 2 . L it e r a t u r e r e v i e w .............................................................................................2

2.1. Studies and pa st survey s related to food security in Sy ria ............................ 22.2. Other references related to food security a ssessm ent .................................... 4

3 . Ch o i ce o f m e t h o d o l o g y ...................................................................................6 A n n e x .................................................................................................................... 19 R e f e r e n c e s ........................................................................................................... 31


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S u m m a r y

This policy brief reviews the various literature related to food security comprising: studiesrelated to food security in Syria, studies related to food security in general and other referencesin order to propose a methodology for the analysis of food security in Syria. In this regard, pastsurveys are also presented. Hence, several approaches, considering their mixed application, areused to assess the state of food security. The first approach is indicator-based emphasizing theindicators focusing on food security dimensions such as food availability, food accessibility and

variability, and those based on FIVIMS 1. The second approach relies on general equilibriumpoint of view using the Social Accounting Matrix (SAM) and the 1-2-3 2 Simple ComputationalGeneral Equilibrium Model (SCGE) to make policy simulations. The third approach focuses onthe econometric estimation of consumer demand by applying the Linear Expenditure System(LES) and the Almost Ideal Demand System (AIDS) to assess elasticities, nutrition relatedmeasures and welfare indicators.

1. B a c k g r o u n d

The objective of food security, as defined by the Food and Agriculture Organization of theUnited Nations (FAO), is to assure that all people, at all times, have physical and economicaccess to sufficient, safe and nutritious food to meet their dietary needs and food preferences foran active and healthy life 3. This has to be achieved at three levels simultaneously: individual,household, and national/regional levels. This definition implies that there is the need not only tohave adequate supplies of food available, but also to maximize their stability and to secure theiraccess 4. It also indicates 5 dimensions for food security: availability, accessibility, stability of supply and access, utilization/nutrition and food & nutrition safety 5.

Relying on above, Chart A1 6 shows different levels of food security and the main analysisapproach. This methodology focuses on comparing supply, demand and consumption withneeds. In addition, Chart A2 illustrates the conceptual framework to assess the state of foodinsecurity by food security dimensions indicating both the dependencies between the macro-environment and food security concepts and the interrelationships among the food security

measures. Hence, the socio-economic and political environment has a substantial impact on thefood security elements and the state of food security. Thomson and Metz (1997) and Siam(2008) formulated several frameworks to identify the impacts of various policies comprisingmonetary, financial, trade, self-sufficiency, production, pricing, marketing, distribution andstock policies. Table 1 illustrates the impacts of selected policies on food security.

Ta b l e 1. I m p a c t s o f s e le c t e d p o l i c ie s o n f o o d s e c u r i t y d i m e n s i o n s

I t em Avai l ab i l i t y Access ib i l i t y Sus t a in ab i l i t y

S u p p o r t p o l i cy Producers support Consumers support

P r o d u c t i o n p o l i cy Self-sufficiency and self-relianceS t r a t e g i c s t o c k s p o l i c y Sustainable availability

Tr a d e p o l ic y Relaxing food

import constraints

Stocking through

importsSource: Elaborated from Siam (2008).

1 Food Insecurity and Vulnerability Information and Mapping Systems.2 One country, two sectors and three commodities.3 Goettingen University (2009) and FAO, SOFA (2005).4 Thomson, Anne and Metz, Manfred (1997) and NAPC, SOFAS 2007.5 Goettingen University (2009).6 Chart A1: Annex Chart 1.


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Chart A3 traces the impacts of structural adjustment programmes on agricultural production,prices and marketing. Chart A4 shows the correlation between macro policies and foodsecurity. Chart A5 indicates the relationships among agricultural policies and food availability and access. Chart A6 identifies the impacts of liberalization of agricultural world trade on thestate of food security in food importing countries. To quantify the impacts of such policies on thestate of food security different approaches and models are used. However, before explaining thenature of such methods, a literature review is conducted to show the various applications of these methodologies and to choose the methodology for conducting the current food security study of the NAPC 7.

2 . L it e r a t u r e r e v ie w

This section reviews various studies and past surveys related to food security in Syria and otherfood security studies and references, which are useful to propose a methodology for the foodsecurity study of the NAPC.

2.1. Studies and pa st survey s related to food security in Sy ria

A study was conducted in 2000 by the NAPC about food secu rity under the supervision of theinternational consultant Hamdi Salem. The organization of the main report followed the formaldefinition adopted by FAO for food security: production of adequate food supplies,maximization of the stability of supplies and secured access to available supplies on the part of those who need them. The report analyzes closely the different factors affecting developments

within these three dimensions, with a view to reaching specific policy recommendations andsuggesting a number of projects that would ensure sustainability of food security over time.

A second study was executed by the UNDP in 2004 about m acroeconom ic policies for povertyreduction in Syria under the supervision of Mahmoud Abdel Fadil and several authors. Thisreport adopted a general approach that focuses on fostering growth with equity. Dealing withinequalities, such as regional inequalities, is integral to this effort. Inequalities can be reduced,the report argues, through general microeconomic policies, such as those that provide farmers

with more secure access to land and credit or stimulate their production through price supports.The report also gives high priority to reducing unemployment and underemployment. Allocating

funds to the unemployed is part of the solution. But employment generation dependsfundamentally on whether growth is rapid and broad-based. General macroeconomic andadjustment policies are decisive in determining such an outcome.

Another study in 2004 was implemented by Ghosh about pov er ty , househ old food avai labilit yand nutritional well-being of children in north-west Syria under the supervision of theDepartment of Nutrition of the University of Massachusetts Amherst. As a result, rural womenand children suffer the most from poverty and its physical and social deprivations. The study compares differences in child growth and nutrition in three rural livelihood groups related to

Aleppo Province in Syria: a barleylivestock group, an olive/fruit tree group and an irrigationgroup. Informal interviews, food card sorts exercise, key informant socioeconomic evaluation,household food frequency and portion size questionnaires, health questionnaires, andanthropometry were conducted. Independent sample t-tests, one-way analysis of variance,GLM8 univariate analysis of variance and linear regression analysis were used.

A food security st ud y and su rv ey focusing on the Arab world comprising Syria were executed by the Arab Organization for Agricultural Development (AOAD) in 2007. The report consists of twoparts. The first section assesses the indicators of food security considering food supplies,accessibility, nutrients, gap and self-sufficiency. The second one investigates the main issuesrelated to food security at both international and Arab levels. The study indicates an adequate

7 NAPC = National Agricultural Policy Center.8 Generalized Least Squares Method.


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development in 2007 regarding food supplies, availability and consumption of plant and animalproducts leading to better nutritional levels and food self-sufficiency ratios as well as toreduction of food gap in spite of the increasing rate of international food prices. The mostimportant issues related to food security explained by the report are the development of international food prices, food safety nets, use of food products for bio-fuel, changes in foodstocks and the impacts of such variables on the livelihood of people. The research discussed alsothe state of food security in the context of the Arab Sustainable Agricultural DevelopmentStrategy in the forthcoming two decades. The AOAD focuses on the cooperation with Arabcountries to execute projects in the fields of the enhancement of food production andconsumption, establishment of national food stocks and foundation of regional stocks especially cereals.

A technical report about income distribution and poverty: impact of selected policies in Syria was published by the NAPC in 2008. The general aim was to strengthen the capacity of NAPCstaff in addressing policy issues for rural areas, as poverty alleviation and internal rural to urbanmigration, using quantitative tools of analysis. A detailed Social Accounting Matrix (SAM) of Syrian economy was built for 2004. The matrix includes accounts for 51 commodities, 41production activities, 2 factors of production and 22 institutions. A high degree of disaggregation has been included for agriculture (31 commodities and 28 activities) and food

sector (15 commodities and 8 activities). The households sector has been disaggregated by income level (deciles of equivalent per capita expenditure) and by regional location (urban vs.rural). The estimated SAM has been used to carry out an analysis of income distribution andpoverty in Syria. A SAM based fixed price model has been used to conduct a structural analysisof distributive features of Syrian economy. The results highlight the existence of structuralasymmetries in income distribution. On the whole richer and urban households are favored by multiplier effects, improving their relative position in income distribution in presence of exogenous increases in final demand. The model has been also used to simulate the impact of selected policy options for agriculture and food industries. Nine policy scenarios have beendefined combining in different ways the suppression of three current policies for food andagriculture (subsidies to agricultural production activities, price support for strategic crops,support of food consumption through the Price Stabilization Fund) with alternative uses of financial resources set free for the Government budget (deficit reduction, Government

expenditure increase, transfer to households increase). A good reference about the food security situation in Syria is the Strategy of Nutrition of the Min ist ry of Hea lth , which describes the food security status in Syria relying on the results of theMultiple Indicators Cluster Survey2006 conducted by the Central Bureau of Statistics (CBS) incooperation with the United Nations Childrens Fund (UNICEF) and published in 2008. Thestrategy describes the nutrition conditions relying on anthropometric, biochemical, clinical anddietary measures and includes the reference intakes of macro and micro nutrients by agegroups. In addition, the Household Expenditure Survey conducted by the CBS in 2003-2004and 2006-2007 represents an adequate data base for applying several methodologies to assessthe circumstances of food security in Syria.

A recent Rapid Rural Appraisal conducted by the MAAR in 2009 focuses on exploring the foodsecurity situation in the villages underlying severe poverty according to the poverty map of Syria

to formulate a national programme for food security in order to reduce poverty complying withthe millennium goals of food security proposed by the World Food Summit. The number of surveyed villages amounted to 17 representing 114 villages. It studies deliberately the villagesconsidering all dimensions of food security and showed the existence of food security problemsespecially concerning the acquired income, nutrients deficiency and malnutrition.

In 2008 a case study about the impact of soaring international food prices on the Near East and North Africa Region (NENA) was performed under the supervision of the FAO RegionalOffice for the Near East relying on survey data from the participated countries. Accordingly,


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Syria was impacted moderately by the increase of food prices and the number of theundernourished augmented slightly because of the fair government policies towards foodsecurity. Another study in 2008 was conducted by the AOAD on the same topic considering

Arab countries including Syria. The study indicates that there are simultaneously positive andnegative impacts on the food security situation in these countries. The impacted variables aresupplies of food stuffs, resource reallocation, cropping structure, demand for and consumptionof food products, food expenditure, food quality, income level, poverty level, trade balance andothers.

Finally, according to the Syria Drought Response Plan (2009), Syria has been affected by drought since 2006. While the 2007-2008 droughts were very severe and had a widergeographical reach, the current drought has again affected a population that was already suffering from the impacts of previous drought spells. According to the Government of Syria andUN assessment missions1, some 1.3 million inhabitants of eastern Syria have been affected by this disaster, out of which 803,000 people have lost almost all of their livelihoods and facedextreme hardship. According to this UN Needs Assessment Mission, up to 80% of those severely affected live on a diet consisting of bread and sugared tea, which only covers on average some50% of both caloric and protein requirements. These families are not able to sustain or restoretheir livelihood without emergency support including food aid, farming inputs, and animal

feeds, supplemented by other types of assistance.2.2. Other references related to food security assessment

Beyer and Walter (1977) illustrated the use of mathematical-statistical methods for thequantitative analysis of economic phenomena comprising output and inputs measures. They used index numbers (Paacshe and Laspeyres) to quantify the impacts of the factors underlyingthese indicators. Hoy et al. (2001) explained the methodology of comparative staticsequilibrium analysis to study the impacts of the changes in exogenous variables on endogenous

variables in economic models such as the Simple Keynsian Model of Income Distribution by assessing the income multiplier. Both aforementioned methods can be used to analyze thedynamic of the SAM accounts.

Johnson, Hassan and Green (1984) explained the application of various demand systems bothstatic and dynamic to assess consumer demand for major foods in Canada. Accordingly,consumption behavior is the focus of continuing emphasis in applied economic research;aspects of consumption behavior that have attracted the attention of economists includeconsumer demand, Engel curve analysis and consumption functions in more aggregatedcontexts. The static demand systems are the LES, the Rotterdam Model and the Indirect AddilogSystem. The dynamic demand systems are the dynamic LES and the State Adjustment Model.Perali (2003) illustrated the use of various demand estimation models including Engel curvesanalysis to study consumers behaviors and to conduct welfare analysis. Extending this analysis,Pomboza and Mbaga (2007) used a modified AIDS model to estimate demand elasticities forfood in the same country. Mittal (2006) indicated that the knowledge of demand structure andconsumer behavior is essential for a wide range of development policy questions likeimprovement in nutritional status, food subsidy, sector and macroeconomic policy analysis, etc.

An analysis of food consumption patterns and how they are likely to shift as a result of changesin income and relative prices is required to assess the food security-related policy issues. Heused a quadratic AIDS model to estimate the price and income elasticities in India and to projectdemand for major food groups using household consumption expenditure data. On the sametopic, Ecker and Qaim (2008) 9 used a quadratic AIDS model to estimate income and priceelasticities of food, calorie and micronutrients consumption in Malawi. Hence, given multiplenutrient deficiencies, income-related policies are better suited than price policies to improvenutrition.

9 Goettingen University (2009).


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Robinson (1989) illustrated the typologies of models and their uses comprising input-outputand social accounting as well as CGE 10 models. Sadoulet and de Janvry (1995) gave an ideaabout a number of monetary measures of change in welfare comprising consumer surplus,compensated and equivalent variation, and real income. Both sources also explained theassessment of Gini coefficient as an indicator of income distribution and dimensions of foodsecurity and their variability using total availabilities, per capita availability, self-sufficiency andimport dependency ratios, and coefficient of variation. Furthermore, they illustrated theestimation of LES and AIDS models and their application to assess nutrition elasticities as wellas the implementation of the SAM and the CGE in various countries. The University of Pretoriaexamined the 1993/1994 SAM of Botswana to make policy simulations on food security usingfixed-price income multiplier and price multiplier analysis. Francois and Reinert (1997)explained the use of a simple CGE model incorporating one country, two sectors and three goods(1-2-3 model). The State of Food and Agriculture 2005 published by the FAO traces the impactsof trade liberalization on food security and poverty, indicates the effects of trade by the means of a CGE model and explains the key features of using such a model.

Bickel et al. (2000), USDA 11, present a guide to measuring household food security comprising aquestionnaire composed of 16 questions and a food security scaling procedure, which can beadopted by measuring the state of food security in Syria.

The Department of Agricultural Economics and Rural Development of Goettingen University inGermany conducted a training course for NAPC staff about food security in 2009. The coursecomprises the following topics: definition and measurement of food security, survey methods toassess food insecurity, analysis of policy impacts on food security, relevance and usefulness of

various models for food security analysis and applied policy analysis. Hence, five principalcomponents of food security are of interest namely: availability, access, stability of supply andaccess, utilization/nutrition and food safety. The course also traces the factors impacting thesedomains relying on various literatures. In this context, indicators have been chosen to assess thestate of food security at national and household level relying on FIVIMS 12 (Table A1). FIVIMShas identified 15 information domains as relevant for the agreed Conceptual Framework forUnderstanding the Possible Causes of Low Food Consumption and Poor Nutritional Status(Table A1 and Chart A7). Table A1 illustrates the selected indicators for National FIVIMScomprising FIVIMS-related indicators and United Nations System Lists. It has been alsodistinguished between macro and micro assessment using various economic models (Chart 1).

Devereux et al. (2004) published a policy paper focusing on best practice in the use of livelihoods analysis in influencing policy issues related to food security and the measurement of hunger. In addition, World Health Organization (WHO) Report (2007), which arises from theJoint WHO/FAO/UNU Expert Consultation on Protein and Amino Acid Requirements inHuman Nutrition, represents a good reference to analyze protein intakes and food security issues. Also, FAO published a paper in 2008, which investigates deriving food security information from national household budget surveys. The document is a compilation of papersfrom 11 countries in Asia, Africa and Eastern Europe and facilitates a better understanding of food security indicators in terms of their production and use for policy analysis as well as theirlimitations.

10 Computational General Equilibrium Model.11 United States Department of Agriculture.12 Food Insecurity and Vulnerability Information and Mapping Systems.


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C h a r t 1. Selected models for quantitative impact analysis

1. M icr o -lev e l 5. M a cr o -a cco u n t in g fr a m e w o r k s1.1. Accounting frameworks 5.1. Input-Output1.2. Profit maximization 5.2. SAM

2 . V a lu e Ch a in A cco u n tin g Fr a m ew o r k s 6 . Gen er a l Eq u ilib r iu m M od els

3 . S in g e l-m a r k et Eq u ilib r iu m M od els 7. I n t eg r a t ed Mic r o -m a cr o A p p r o a ch es

4 . M u lt i-m a r k e t Eq u ilib r iu m M od els 8 . M u lt i-p er io d Co s t -B en ef it A n a ly sis

Source: Elaborated from Goettingen University (2009).

Mode l s fo r Po l i cy Im pac t Ana lys i s

Qaim (2009) 13 gave an idea about the economics of micronutrient malnutrition comprisingdefinition and international overview, assessment of micronutrient status, integration of micronutrients in policy impact assessments and micronutrient intervention. He explained theimpacts of micronutrient deficiency and the methods applicable to avoid the shortage of micronutrients, the use of econometrics to assess the level of nutrient intakes given severalindependent variables such as income and home garden and the application of the AIDS modelto estimate various elasticities (price, income and nutrients).

Finally, comparing Syrian food security indicators with international ones is a useful tool totrace the performance of the Syrian economy concerning food security issues. FAO FoodOutlook published in 2009 about global market analysis, FAO database and AOAD databaseserve such an aim.

3 . Ch o i ce o f m e t h o d o l o g y

According to the previously mentioned literature, the methodology focuses on two approachesto assess the food security situation in Syria and to make policy simulations namely: macroassessment and micro evaluation.

The macro analysis is conducted relying on selected FIVIMS indicators that are used toinvestigate the food security situations on national/sub-national levels (Table 1, Table A1 andcharts presented in Annex) as well as SAM assessment to trace the impacts of exogenous shockson food security (Chart 1).

Sum selected FIVIMS measures are food availability, food access, stability of food supply andaccess, food acquisition and food safety considering the policies affecting those. Food availability is measured by the assessment of total availability and the per caput availability taking intoaccount the domestic supply compared with domestic consumption and internationalindicators; food accessibility is analysed using measures of income such as real GDP, food pricesand food price indexes; stability of supply and access is illustrated by using the coefficient of

variation; food acquisition is assessed in the form of macro and micro nutrients compared withinternational measures; food safety is estimated using health and sanitation indications; seechart A2. The changes in the aforementioned measures and those underlying factors are also

presented using the average annual growth rate (AAGR) and index numbers analysis.Total availability = domestic supply + import export non-food uses wastage & losses changes instock

Per caput availability = total availability/population

CV = standard deviation of (y i-i)/ i * 100

13 Goettingen University.


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Where:

CV- Coefficient of variation measured in percent;

y i- The current value;

i- The trend value.

Average change% = ((average last three years average first three years)/average first three years)*100 AAGR = (Power (average of the last three years/average of the first three years, 1/N)-1)*100

Where:

AAGR- Average annual growth rate measured in percent;

N- Number of years-1

Change% = (y i-y o)/y o * 100

Where:

y i- The current value;

y o- The base value.

In addition to the aforementioned indicators, it is useful to assess welfare and inequality measures.

A financial measure of the welfare change comprises the changes in real income (y) andconsumer surplus ( CS) due to price change between the states (p 0 , y 0) and (p 1, y 1) according tothe following equation:

S = y 1-y 0 + CS

Where:

S change in welfare;

y 1 current income;

y 0 income in base year;

p0 price of the base year;

p1 price of the current year;

CS change in consumer surplus;

- change.

The change in real income can be expressed as follows:real y/real y = y/y - p/p

Where, p denotes the price.

In this regard, the definition of a true price index (P) is necessary to achieve a constant level of utility. Such a price index can be assessed as the ratio of the minimum expenditure required incurrent period 1 and base period 0. Typical candidates are the Laspeyres Price Index P L and thePaasche Price Index P P. To avoid the drawbacks of both indices, the Fishers Ideal Price Index P F is also calculated.PL = q i0 p i1/ q i0 p i0

PP = q i1 p i1/ q i1 p i0

PF = q i0 p i1 q i1 p i1/ q i0 p i0 q i1 p i0

Where, I is assigned for commodity, q denotes quantity and is the square root.


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Index numbers can also be used to separate the impact of various factors on an indicator. Forexample, the total expenditure is composed of the quantities consumed and the prices paid by the consumer. To split the impact of quantities and prices on the total expenditure between thecurrent period and the base period, the following formula can be useful:

IE = I q Ip

Or:

q i1 p i1/ q i0 p i0 = q i1 p i0 / q i0 p i0 * q i1 p i1/ q i1 p i0

Where:

IE = q i1 p i1/ q i0 p i0 Index of total expenditure, which traces the impact of both quantities and priceson total expenditure;

Iq = q i1 p i0 / q i0 p i0 Index of quantity, which indicates the effect of quantities on total expenditureholding prices constant;

Ip = q i1 p i1/ q i1 p i0 Index of price, which assesses the influence of prices on total expenditure keepingquantities fixed.

The consumer surplus is an attractive measure of consumer benefits from price change becauseit represents the excess willingness to pay over what is actually paid (Figure 1 and formula).

Figur e 1. Consumer surplus

p

p0

CS

p1

D

qq0 q1

Source: Elaborated by the author.

CS = q 1 (p 0 p 1) + 0.5 (q 1 q 0) (p 0 p 1)

D Demand curve.

A simple statistical indicator of income inequality is the coefficient of variation of income cv(y), which is the ratio of the standard deviation of income (y) to mean income . A more accuratemeasure is to calculate the cv(y) considering the trend line.

Analysis of the interaction among sectors is crucial to identify the role of agriculture and othersectors in the development process considering food security aspects. Such linkages are thefocus of a Social Accounting Matrix (SAM). A SAM is a square matrix in which each trans-actoror account has its own row and column. The payments (expenditures) are listed in columns andthe receipts in rows. As each account must balance, the corresponding row and column totalsare equal. There are six types of accounts in the SAM: the activities, commodities, and factors(labor and capital) accounts; the current accounts of the domestic institutions, divided intohouseholds, firms, and the government; the capital account; and the rest of the world account


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(ROW). 14 The composition of these accounts can be presented as indicated in Annex, Table A2and Table A3. The SAM is also used to make policy simulations. Therefore, its divided intoendogenous and exogenous accounts. The account is called endogenous when changes in thelevel of expenditure follow directly any change in income, while by exogenous accounts theexpenditures are set independently of income. The relationship between endogenous andexogenous accounts can be illustrated as indicated in Table 2. Y is the vector of total income orexpenditure of the endogenous accounts, F the vector sum of the expenditures of the exogenousaccounts, L the column vector of the income of the exogenous accounts, M the square matrix (nx n) of coefficients of the endogenous accounts and B the rectangular matrix (m x n) of thecoefficients with exogenous accounts.

Ta b le 2 . R e la t i o n s h i p b e t w e e n e n d o g e n o u s a n d e x o ge n o u s a c c o u n t s o f t h e S AM

I t e m E n d o g e n o u sa c c o u n t s ( n )S u m o f e x o ge n o u s

a c c o u n t s ( 1) To t a l

E n d o g e n o u s a c co u n t s ( n ) MY F Y E x o ge n o u s a c co u n t s ( m ) BY L

To t a l Y Source: Elaborated from Sadoulet and de Janvry (1995).

If denotes the change, one may define:

The matrix of multipliers (I-M) -1

The vector of shocks F

The vector of impacts Y = (I-M) -1 F

The leakages L = B Y

A shock, or injection, is induced by a change in elements of the exogenous accounts. Themodel solves for the equilibrium level of all the endogenous accounts. Multipliers are completely demand driven. The matrix M of technical coefficients (a ij) is imputed as the ratio of thecorresponding cell of the SAM matrix to the column total. Inverting the block (I-M) gives theSAM multipliers, which represent the direct impacts on production (sectors) and income(factors) of an increase in exogenous demand. This process is called the problem of comparative-static equilibrium analysis or comparative statics (see Annex, The Simple

Keynesian Model of Income Determination)15

. In addition to comparative statics, index numberanalysis can also be used to analyse the dynamic of SAM accounts.

Furthermore, a concise SAM can be useful to a apply general equilibrium analysis for thepurpose of making policy simulations considering prices 16. Such SAM is presented in Table 3.Hence, the variables are: X = output (GDP), C = household consumption, G = governmentconsumption, Z = investment, E = exports, Y = income (value added), T h = household taxes, S h =household savings, S g = government savings, B = balance of trade and M = imports; themicroeconomic identities are: Y = X (domestic income = domestic product), X + M = C + G + Z+ E (aggregate supply = aggregate demand), Y = C + S h + T h (household income = expenditure),Sg = T h G (government savings = taxes expenditure), Z = S h + S g + B (investment = savings)and B = M E (balance of trade = foreign savings).

Relying on the aforementioned SAM, the Basic 1-2-3 Simple Computational General

Equilibrium Model (CGE) can be applied. The model assumes one country, two producingsectors and three goods: an export good E, which is sold to foreigners and not demandeddomestically, a domestic good D, which is only sold domestically, and an import good M, whichis not produced domestically. There is one consumer who receives all income. The country is

14 For more details, see Sadoulet and de Janvry (1995) and NAPC (2008).

15 Also, see Hoy et al. (2001).16 Chenery and Srinivasan (1989).


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small in world markets, facing fixed world prices for exports and imports. The equation systemis presented in Table 4. The model can also be solved as programming problem (see annex).

The above-mentioned approaches can be applied at micro level or household level considering both the distributional effects among households and household characteristics. In addition, anextension is needed in the fields of income distribution


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Ta b l e 3 . A m a c r o e c o n o m i c S AME x p e n d i t u r e s

R e c e i p t s Ac t iv it i e s Co m m o d i t i es H o u s e h o l d s G o ve r n m e n t C a p i ta l a c c o u n tAct ivi t ies X C o m m o d i t i e s C G Z H o u s e h o l d s Y G o v e r n m e n t ThC a p i t a l a c c o u n t Sh SgR e s t o f t h e w o r l d ( R O W ) M

To t a l Domestic income Supply Expenditures Source: Elaborated from Chenery and Srinivasan (1989).

Ta b l e 4 . Th e b a s i c 1- 2 -3 C G E m o d e l

F l o w s P r i c e s E q u i l i b r i u m c o n d i t i o n s I d e n t i t i e s E n d o g e n o u s v a r i a b l e s

-X = G(E, D s; ) Pm = R pw m DD = D s

-Px X = p e E + p d Ds E: Export good

Qs = F(M, D D; ) P e = R pw e QD = Q s Pq Qs = p m M + p d DD M: Import good QD = Y/p q Px = g 1(p e, p d) -Pw m M pw e E = B Y = p

q QD Ds: Supply of domestic good

E/D s = g 2(p e, p d) P q = f 1(p m, p d) DD: Demand for domestic goodM/D D = f 2(p m , p d) R = 1 Q s: Supply of composite good

- - Y = p x X + R B Q

D: Demand for composite good

Y: Total incomep e: Domestic price of export goodPm: Domestic price of import goodPd: Domestic price of domestic goodPx: Price of aggregate outputPq: Price of composite goodR: Exchange rate-

X: Fixed aggregate production (realGDP)Source: Elaborated from Francois and Reinert (1997).


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(Gini) and demand estimation to calculate demand elasticities, nutrition elasticities andconsumer surplus.

A more complete way to analyse income distribution is accomplished by constructing the LorenzCurve, which traces the relationship between the cumulative income and cumulative population,and estimating the Gini Coefficient (Figure 2 and formula).

F i gu r e 2 . I n e q u a l it y o f in c o m e a n d a c ce s s t o f o o dCumulative income (%) M

1

2

O NCumulative population (%)

1 45 degree line (perfect equality)2 Lorenz curveG Shaded area

G


Gini = area G/area OMN

The Gini coefficient 17 varies from 0 (perfect equality) to 1 (perfect inequality).

To assess consumer demand, there are various approaches: single equation and demandsystems, which are characterized by advantages and disadvantages; hence, the focus is here onEngel curve estimation, the Linear Expenditure System (LES) and the Almost Ideal DemandSystem (AIDS).

By the Single Equation Approach, the demand functions will be estimated in a pragmaticfashion without recourse to the economic theory. Thus, these ad hoc models or single equationmodels can not represent preferences for all goods we buy, so the total expenditure function andutility based on the consumption of the complete basket can not be derived. However, suchmodels can be implemented in the context of a welfare analysis where a great accuracy is notrequired like the one achieved by estimating a system of demand equations. A typical situation,for instance, is to estimate from time series data the income and price elasticities for acommodity in a constant elasticity demand equation such as:

lnQ i = i + E ij ln P j/P + i ln y/P + b ik ln z k Where: Q i = Quantity purchased of good i per capita, P j = Prices of good i and of selected othercommodities j which are close substitutes or complement, y = Total expenditure per capita, P =Consumer price index, E ij = Direct and cross price elasticities, i = Expenditure elasticity, z k =Household characteristics, time (to account for steady changes in tastes, in the distribution of income, and in the quality of products), and other exogenous variables, b ik = Elasticities of demand with respect to z k ; see Perali (2003), Sadoulet and de Janvry (1995), and Oezcan, Tanand Dellal (Ankara, Turky).

The use of relative prices (P i/P) and real income (y/P) as exogenous variables makes thedemand equations homogenous of degree zero in prices and income. This insures that there isno money illusion in demand in the sense that it is not affected by a proportional increase in

17 For more details, see Sadoulet and de Janvry (1995).


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all prices and income. Moreover, this approach is designed to answer policy questions that arespecific to a particular commodity or commodity group.

The drawbacks of this approach can be summarized as follows: The choice of functional forms for the demand equations and of the variables to beincluded is arbitrary (combination of common sense, interest in specific elasticities,computational convenience, and goodness of fit criteria). The log functional form used above assumes constant elasticities over all values of theexogenous variables. This is true only over a short range of prices and income (because of switching between luxuries and necessities as income increases). Predictions relying on this approach may not satisfy the budget constraint.

More flexibility to the model can be introduced in the case of nonlinearities by adding aquadratic term (income, price, and demographic). For example, when the model is non-linear inincome, the model can be written as follows; see, Perali (2003) and Raunikar and Huang (1984).

Ln Q = a 0 + a 1 ln d + a 2 ln p + a 3 ln y + a 4 ln y 2

Where: a 0 , a 1, a 2, a 3, a 4 are parameters to be estimated, d = demographic variable, p = price, y =

income.Holding prices constant is considered a link to study the relationship between the consumptionof food and income, which is expressed through Engel laws and Engel curves (Table 5), seeBinger and Hoffman (1998) and Perali (2003).

Tab le 5 . En ge l s cu r ves

E n g e l s c u r v e M a t h e m a t i ca l f o r m u l aI n c o m e

elas t i c i ty

Linear q = a + b*y i = b*y/(a + b*y)

Double-logarithmic lnq = a + b*lny i = b

Semi-logarithmic (semi-log) q = a + b*lny i=b/q = b/(a +

b*lny)Logarithmic reciprocal lnq = a b/y i =b/y = a - lnq

Working Leser (WL) Engel curve (semi-log)

WL Engel curve with demographic

WL Engel curve with prices

WL Engel curve with prices and demographic

w = a + b ln (y/N)**

w = a + b ln d + c ln (y/N)

w = a + b ln p + c ln(y/N)

w = a + b ln d + c ln p + d ln

i = b/w + 1

Source: Elaborated from Sadoulet and de Janvry (1995) and Perali (2003)**y* = y/N.

F ir s t E n g e l L a w : As the log of income increases, the food share decreases.

S e c o n d E n g e l L a w : As family size increases, the share of expenditure allocated to food also

increases.The estimated Engel curves should have several qualities (Sadoulet and de Janvry, 1995): They should satisfy the budget constraints. The predicted expenditure for eachcommodity should add up to the total expenditure. They should be able to represent luxuries, necessities, and inferior goods. They should have variable income elasticities due to the empirical fact that incomeelasticities tend to decline as income increases.


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The consumption of many commodities should reach a saturation point as incomeincreases.

The Demand Systems Approach uses a complete system of demand equations relying on theeconomic theory. This system of equations aims at taking into account consistently the mutualinterdependence of large numbers of commodities based on the structure of relative prices, real

income, and a set of individual characteristics and demographic variables such as age,education, professional status, type of household, and rural versus urban population. Theestimation results can be used to study behavior (forecasting) and to conduct welfare analysis;see Perali (2003).

S t u d y o f b e h a v i o r :

Demand for goods (wheat, nutrients, etc.). Analysis of structural changes: habits, heterogeneity of tastes. Demand for quality characteristics.

We l f a r e a n a l y s is :

Estimation of the expenditure function and utility in order to derive the compensating variation which is an exact measure of consumer surplus.

Poverty and inequality. Consumer Surplus (CS). Demand and optimal taxation.

The microeconomic theory of consumer behavior postulates that a consumers choice can bedescribed as deriving from utility maximization subject to a budget constraint. Thus, theobjective of the theory is to explain how a rational consumer chooses what to consume whenconfronted with various prices and a limited income. Consequently, the solution to thismaximization problem is a system of demand equations (first order conditions) restricted toseveral homogeneity and aggregation conditions.

Sadoulet and Janvry (1995), Johnson, Hassan, and Green (1984), and Perali (2003) illustratedthe theory of consumers behaviors and the restrictions imposed on the system of equations. Accordingly, the consumer maximization problem can be described as follows:

Max L = u(q,z) + (y p q) subject to and q

Where: L The consumer objective function, u(q, z) Utility function of the consumer,

q- Vector of quantities of n commodities on which a consumption decision must be made, z- Individualcharacteristics, - Langrange multiplier, y The amount of income which can be spent, p N dimensional vector of prices, y = pq.

The solution to the aforementioned maximization problem is a set of demand equations q i = q i (p, y, z) with i = 1 n. The n equations include n income slopes q i/ y (partial derivative) orincome elasticities i = q i/ y * y/q i and n 2 price slopes q i/ p j or price elasticities E ij = q i/ p j

* p j/q i. According to the signs and magnitudes of these elasticities the goods are classified asfollows:

O w n - P r i c e E l a s t i ci t y

Non-Giffen good: E ii < 0 (E ii < -1 elastic; E ii > -1 inelastic) . Giffen good: E ii > 0 (see Binger and Hoffman (1998)) .

Cr o s s - P r i c e E l a s t i ci t y


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Gross substitutes: E ij > 0. Gross complements: E ij < 0.

I n c o m e El a s t i ci t y

Normal good: i > 0 ( i > 1 luxury; i < 1 necessity). Neutral good: i = 0. Inferior good: i < 0.

The parameters of the demand equations must satisfy the following constraints:

1. The Engel aggregation equation derived from the budget constraint:

p i q i/ y = 1 or w i i = 1, where w i = p i q i/y is the budget shares.2. The n Cournot equations derived also from budget constraint:

p i q i/ p j = - q j or w i E ij = - w j, for j = 1, , n.The two sets of equations together lead to the n Euler equations (not additional restrictions)

which represent the homogeneity conditions ( E ij + i = 0; i = 1, , n). These conditions statethat demand functions are homogeneous of degree zero in prices and income. In other words, if all prices and income increase in the same proportion, demand remains unchanged.

3. The n (n-1)/2 Slutsky equations that express symmetry in substitution effects:

E ij = w j/w i * E ji + w j ( j i), for i j = 1, , n.

Consequently, several demand systems approaches have been evolved to solve thismaximization problem, the most important of which are the Linear Expenditure System (LES),the Almost Ideal Demand System (AIDS), and the Generalized Almost Ideal Demand System(GAIDS); see, Sadoulet and Javry (1995) and Perali (2003), Raunikar and Huang (1984),Johnson, Hassan, and Green (1984), and Little (1985). It is worth to note that demand systemsare used when accuracy is required in demand estimation.

The advantages and disadvantages of applying a demand systems approach can be summarized

as follows: It delivers more reliable estimates. It uses the theory of demand as a guideline for the choice of functional forms and

variables to be included. It imposes constraints on demand parameters. However, it requires data on individual consumer (which are not easily available).

The research at hand investigates the LES and AIDS.

T h e L in e a r E x p e n d i t u r e S ys t e m (LES):

The demand equations of the LES are derived from maximizing the Stone-Geary utility function(u = b i ln(q i c i) subject to a budget constraint (Sadoulet and de Janvry, 1995). Where thesymbols denote the following:

u- Utility.

b i Constant greater than zero (0


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The nutrient elasticities are derived directly from the price and income elasticities for food itemsconsidering the technical coefficients measuring the nutrient content (a ni). For example, giventhe technical coefficient for calorie (a ci), the calorie elasticities can be calculated as follows:

Eci = (dc/c)/(dp i/p i) = acj q j E ji/ acj q j, and cy = (dc/c)/(dy/y) = acj q j j/ acj q j, where E ci denotes theprice elasticity of calorie, cy is the income elasticity of calorie and d indicates difference.

Finally, Qaim and Ecker (2008) applied a quadratic AIDS model using a quadratic income term within three-stage budgeting process to estimate food demand and its determinants in Malawi.


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A n n e x

C h a r t A1. D if fe r e n t le v e l s o f fo o d s e c u r i t y a n d m a j o r a n a l ys i s a p p r o a c h

Food Secure Food Insecure

Supply > Demand and/or Supply < Demand and/orDemand > Needs Demand < Needs

MarketsGevernmentDistribution

Demand > Needs Household Demand < Needs

Consumption > Needs Consumption < Needs

NationRegion

Intra-household relationships

Individuals

Source: Elaborated from Thomson, Anne and Metz, Manfred (1997).

C h a r t A 2 . Co n c e p t u a l fr a m e w o r k f o r f o o d i n s e c u r i t y

1. Population 1. Household characteristics 2. Education 2. Livelihood systems 3. Macroeconomy 3. Social institutions 4. Policy environment 4. Cultural attitudes 5. Natural resource endowment6. Agricultural sector7. Market conditions

1. Production 1. Purchasing power 1. Food production 2. Imports (net) 2. Market integration 2. Incomes 3. Utilization (food, non-food) 3. Access to markets 3. Markets 4. Stocks 4. Social entitlements

1. Health care practices Health status 1. Energy intake 1. Child care 2. Hygiene 2. Nutrient intake 2. Feeding practices 3. Water quality 3. Nutrition education 4. Sanitation 4. Food preparation 5. Food safety and quality 5. Eating habits

6. Intrahousehold food distribution

Nutritional status

Health and sanitation Food utilization Food consumption Care practices

(trends and levels)Access to food

(trends and levels)Stability of food suppliesand access (variability)

Socio-economic and political environment

National level Subnational level

Food availability

Source: Elaborated from FAO, the State of Food and Agriculture 2005.


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Ch a r t A3 . Im p a c t o f e c on o m i c r e f or m a n d s t r u c t u r a l a d ju s t m e n t p r o g r a m m e s o na g r i c u lt u r a l p r o d u c t i o n , p r i c e s a n d m a r k e t i n g

m a r k e t i n g & a d m i n i s te r e d

p r i c e s

I n c r e a s e c a s h a n d

p r o f it a b le c r o p s

Ad o p t a t i o n o f

I n c r e a s e co n s u m e r s

f r e e c r o p p i n g

I n c r e a s e p r o d u c t i o n c o s ts

E li m i n a t i o n o f a g r i c u l t u r a lp r o d u c t io n i n p u t s s u p p o r t

I n c r e a s e p r i c e s o f a gr i c u lt u r a lp r o d u c t io n in p u t s

R e m o v a l o f o b li ga t o r y

E co n o m i c r e f o r m a n d s t r u c t u r a l a d ju s t m e n t p r o gr a m m e s

I n c r e a s e a g r i c u lt u r a lo u t p u t p r i ce s

C u lt i va t i o n d u e t of a r m e r s p r e f e r e n ce s

p r i ce s a n d a d o p t a t i o n o f f r e e m a r k e t i n g a n d

m a r k e t p r i c es

Source: Elaborated from Siam (2008).

Ch a r t 4 . R e la t i o n s h i p s a m o n g m a c r o p o l i ci e s a n d f o o d s e c u r i t y

Tariffs M ark et Su pport Exch an ge ra tereform Taxes Cred it s

Transfers

Relationship between m acro policies and food secur ity

Employmentpolicies

Em ploy m ent sector

Na tio n a l con su m p t io n

Price intervent ions

Monetar y policies

In p u ts p r ices Lan d

Labou r Capital

Non -t rad able s

Fam ily inco m e

H ou seh old fo od consum ption

Im p ort p r icesExport prices

Trade policies Finan cial policies

Output prices



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C h a r t A5 . R e l a t i o n s h i p s a m o n g a g r i c u l t u r a l p o l ic i e s a n d f o o d a v a i la b i l i t y a n daccess ib i l i t y

Rela t ionsh ips am on g agr icu l tu r a l po l ic ies an d food ava i lab i li ty an d access ib i li ty

R e s ea r c h a n dd e v e lo p m e n t

F ood c rop s N o n -f o od cro p s

Cr o p p in gpolicies

Pr icepolicies

Tr a d epolicies

F o o d su p p o r tpolicies

Out pu t p r i ces In p u t s p r ic es

Im p or t t a r if fsE x p o r t s u p p o r t

Co n s u m er p r i ces Im p o rt p r ic es

Fo o d a va ila b ility Fo o d a ccess ib ility

Im p o rt q u a n t it ie s


C h a r t A 6 . I m p a c t o f i n t e r n a t i o n a l a g r i cu l t u r a l t r a d e l ib e r a l iz a t io n o n f o o d i m p o r t i n gc o u n t r i e s

R em o v a l o r r ed u c t io n o f n o n - t a r if f c o n s t r a i n t s R ed u c t io n o f t a r if fs

E xp o r t s u p p o r t

R ed u c t io n in d ev elo p ed c o u n t r i e s

D o m e s t i c s u p p o r t

R ed u c t io n in d ev elo p ed c o u n t r i e s

I m p a c t o f i n t e r n a t i o n a l a g r i cu l t u r a l t r a d e l ib e r a l i za t i o n o n f o o d i m p o r t i n g c o u n t r i e s

In c r ea s e d o m es t ic p r ic es o f a g r ic u lt u r a l a n d fo o d p r o d u ct s In cr ea s e fo o d im p o r t b il l

Fo o d a v a ila b ilit y Fo o d a cces s ib ilit y

P r o m o t i o n o f i m p o r t s R ed u ct io n o f d o m es t ic p r ic es

In c r ea s e in t er n a t io n a l f o o d p r ic es

P r o m o t i o n o f a g r i cu l t u r a l a n d f o o d p r o d u c t i o n

M a r k e t a c c e ss



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Ta b l e A 1. N a t i o n a l F I V I M S i n d i c a t o r s

OECD UNIDGs CCA

Food Consumption StatusAverage per person dietary energy supply

(DES)x x x x x

Cereals, roots and tubers as % of DES x xPercentage of population undernourished x x x x x x

Health StatusLife expectancy at birth x x x xMaternal mortality rate (%) x x x xUnder-5 mortality rate (%) x x x x xInfant mortality rate (%) x x xPrevalence of anaemia xPrevalence of cholera xPrevalence of acute respiratory infections xPrevalence of diarrhea xPrevalence of HIV x xPrevalence of malaria xPrevalence of tuberculosis x

Nutritional Status x x xPercentage of adults with body mass index

(BMI)


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Tab le A1. Con t in ue d

OECD UNIDGs CCA

Environmental ConditionsUrban air pollution x

Economic Conditions

Changes in cereal production xCropped area as % of total area x

Employment of population of working age (%) x x x

Export price movements for wheat, maize andrice

x

Growth in cereal yields xGrowth in GDP xGrowth in GNP per person x x

Growth in staple food yields, by commodities x

Informal sector employment as % of totalemployment

x

Ratio of five major grain exporters' suppliers t orequirements

x

Share of agriculture in GDP (%) x x xVolume of production, food use, trade andstock changes for major food commoditiesWages, by economic activity (real $ per year) xYield per hectare for major cereals x x

Political Conditions Number of countries facing a conflict-relatedemergency

x

Socio-Cultural ConditionsAdult literacy/illiteracy rate x x x xFemale illiteracy rate x xGirl net enrolment rate in primary school x x xLiteracy rate of 15-24 year-olds x x

Net primary enrolment or attendance rate (%) x x x x xPercent of population with access to primaryhealth care

x x

Risks, Hazards, Shocks National monthly rainfall index x Number of countries facing food emergency x

Land use change xPercentage of population affected by droughtsand natural disasters

x x

Percentage of land with erosion risk x xRate od deforestration x

Food availabilityAnimal protein supply per person xCereals supply per person xDietary fat supply per person xDietary protein supply per person xFood production index x x

Food AccessConsumer prices index x xFood prices index x x xGini index of income distribution x x xGDP and GNP per person x x x x xGNP per per son at Pur chasing Power Par it y xMarket density (number of markets per unitarea) xPaved roads as % of total road mileage x xPeople living below national poverty line (%) x x xPeople living on less than $1 a day (%) x xPercentage of household income spent on foodfor the poorest quintile

x x

IndicatorFIVIMS-related indicators UN-system lists

CFS FAOS FAOFSR ANDI Asia KIDS


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Tab le A1. Con t in ue d

OECD UNIDGs CCA

Food Access (continued)Percentage of income spent on food x xPoorest fifth share of national consumption x xPoverty gap ratio x x x

Road density (kilometers of road per unit area) x

Share of national in come by percentile of population

x

Stability of Food Supplies and AccessCereal import dependency ratio x xFrquency of published or broadcast marketinformation

x

Index of variability of food production x xMonths of cereal self-provisioning capacity x x xVariability of food prices x x x

Household CharacteristicAverage household income (only urban) xAverage household size x

Number of persons per room, or average floor area per person x

Ratio of dependants to wage-earners in averagehouseholds

x

Health and SanitationContraceptive prevalence rate (%) x xEstimated HIV adult prevalence rate %) xHIV prevalence in pregnant women under 25years of age (%)

x x

Percentage of 1 year old children immunisedagainst measles

x x

Percentage of population with access toadequate sanitation

x x x

Percentage of population with access to primary health care services

x

Percentage of population with access to safewater

x x x x x

Care and Feeding Practices Number of meals eaten in a day xPercentage of births at tended by skilled health

personnelx x

Percentage of children under 15 in the labour force

x

Weaning age x

Abbreviations:

CFS: Committee on World Food Security.

ANDI: African Nutrition Database Initiative.Asia KIDS: Asia Key Indicators Data System.

IndicatorFIVIMS-related indicators UN-system lists

CFS FAOS FAOFSR ANDI Asia KIDS

IDGs: International Development Goals of the Millenium Summit .

FIVIMS: Food Insecurity and Vulnerability Information and Mapping Systems.

UNCCA: United Nations Common Country Assessment.

Source: FAO (2002). Making FIVIMS Work For You.

FAOS: Food and Agriculture Organization of the United Nations Secretariat.FAOFSR: Food and Agriculture Organization of the United Nations Food Security Report.

OECD: Organisation for Economic Cooperation and Development.


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C h a r t A 7. S e le c t i n g i n d i c a t o r s f o r N a t i o n a l F I VI M S

National and Sub-National Context Indicators

Demographic Economic Political Conditions Conditions Conditions

Individual Outcome Indicators

Health Status Food Consumption Status

National Food Economy Indicators

Food Availability Food Access Stability of S

Einvironmental Conditions and Natural Resources

Social and CulturaConditions

Source: Elaborated from FAO, Making FIVIMS Work for You.


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Ta b l e A3 . Co m p o s i t i o n o f S AM a c c o u n t s 2

I t e m C o m m o d i t ie s Ac t iv it i e s F a c t o r s I n s t i t u t io n s C a p i t a l

C o m m o d i t i e s IntermediateconsumptionsFinalconsumptions Investments

Activi t ies Domestic supply

F a c t o r s Value added

I n s t i t u t i o n sTaxes lesssubsidies

Taxes lesssubsidies

Factors income toinstitutions

Inter insititutionaltransfers

C a p i t a l Savings

R e s t o f t h ew o r l d import

Factor paymentsto abbroad

Current tranfers toabroad

Capital transfers toabroad

To t a l Total supply of products Total outputTotal factor

income payments Total institutionaloutlays

Total out-flows of capital ac-count

Source: NAPC (2008).


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T h e S im p l e K ey n e s ia n M o d e l o f I n c o m e D e t e r m i n a t i o n

Economic models have two types of variables: endogenous variables, whose values the model is designedto explain, and exogenous variables, whose values are taken as given from outside the model. A centralpart of the analysis will often be to show how the solution values of the endogenous variables change withchanges in the exogenous variables. This is the problem of compar ative-static equilibrium analysis or com parat ive statics .

Let Y denote the national income. The aggregate demand for goods and services consists of twocomponents: consumption demand C and investment demand I. I is considered exogenous, whereas C isdetermined by the consumption function.

C = c Y, where c is the m arginal propensity to consum e and 0< c < 1; the equilibrium condition is thataggregate supply must equal aggregate demand, or Y = C + I implying that Y* = I/(1-c), where Y* is theequilibrium income. This is illustrated in Figure A1. The 45 o line OE shows the set of points at which C + I= Y or the set of equilibrium points; the line OC, with slope c, denotes the consumption function C = c Y;the horizontal line gives the exogenous investment level I; the line IC, also with slope c, is therefore theaggregate-demand function C + I = c Y + I; its intersection with the 45 o line gives the equilibrium incomelevel Y* at which aggregate demand is equal aggregate supply.

F i gu r e A 1. E q u i li b r i u m i n t h e s i m p l e K e yn e s i a n m o d e lC, I, C + I E

C'

C

I

O YY*


The comparative-statics question in this model is: How does a change in exogenous investment I affectthe equilibrium income level Y*? Algebraically, the answer is found simply by regarding Y* as a functionof I, either implicitly through the equilibrium condition (1 c) Y* - I, or explicitly through the solution Y*= I/(1 c). In either case by differentiation, it follows that dY*/dI = 1/(1 c) > 0. Therefore, anincrease in investment increases equilibrium national income by a multiple 1/(1 c)-the multiplier.Diagrammatically, the comparative statics is illustrated in Figure A2.

F i gu r e A 2 . C h a n g e i n e q u i li b r i u m l e ve l d u e t o e x t e r n a l s h o c k C, I, C + I E

C''

C'

I'

I

45 o

O YY* Y**



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Ta b le A 4 . Th e 1-2 -3 m o d e l a s a p r o g r a m m i n g p r o b l e mMaximize Q = F(M, D D; ) with respect to: M, E, D D and D s (absorption)

Subject to:

Shadow price:-

G(E, Ds; ) X (technology) x

= px/p

q

- pw m M pw e E + B (balance of trade) b = R/p q DD Ds (domestic supply and demand) d = p d/p q Source: Elaborated from Francois and Reinert (1997).


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Pomboza Ruth and Mbaga Msafiri. 2007. The Estimation of Food Demand Elasticities inCanada . Canada.

Pomboza Ruth and Mbaga Msafiri. 2007. The Estimation of Food Demand Elasticities inCanada . Canada.

Raunikar Robert and Huang Chung Liang. 1984. Food Demand Analysis . Iowa StateUniversity Press, Ames, Iowa.Robinson, Sherman. 1989. Multisectoral Models . Elsevier Science Publishers, Handbook of Development Economics, Volume II.

Sadoulet Elisabeth and de Janvry Alain. Quantitative Development Policy Analysis . The JohnsHopkins University Press, Baltimore and London. 1995.

Salem, Hamdi (2000). Food Security . NAPC, Damascus, Syria.

Siam, Jamal. 2008. Food Chain an d Relat ed Policies . NAPC, Damascus, Syria.

UNDP. 2004. Macroecon om ic Ppolicies fo r Pov er ty Reduction : Th e Case of Sy ria , by AbdelFadil Mahmoud et al. Damascus Syria.

United Nations. 2009. Syr ian Drought Response Plan .

Walter, E. and Beyer, H., 1997. Contribution to Applying Mathematical Statistical Methods byFirm Analysis . Verlag Die Wirtshaft, Berlin.

WHO, FAO and United Nation University. 2007. Protein and Amino Acid Requirements in Hum an Nutrit ion .

33 pol brf food models en

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