Institute of Food Economics and Consumption Studies

The impact of macroeconomic policies and trade on food security, nutrition and health

During the 1960s and 1970s it has been typical for governments of developing countries to isolate domestic markets from world markets through specific mechanisms such as direct tax and subsidies or quantitative restrictions. The main aim was to protect domestic sectors that would not have been able to successfully compete in world markets from foreign competition. During the 1980s and 1990s, however, many developing countries initiated policy reforms under structural adjustment programs of the World Bank and the International Monetary Fund. The rationale for trade liberalization is couched in terms of its presumed favorable effect on economic growth mainly through induced efficiency gains in the allocation of resources. Although trade liberalization may not be the most powerful or direct mechanism for addressing poverty, it is one of the easiest to implement. 

Trade reform involving tariff reductions and the abolition of non-tariff barriers may be one of the most effective anti-poverty policies available for governments. However, whether trade liberalization promotes economic growth and improves overall social welfare remains a controversial issue. Apart from its effect on GDP per capita growth, which has been extensively studied, a case in point which deserves further attention is the impact of trade liberalization on poverty and food security. The analysis of food security impacts of trade liberalization policies is crucial and helps to facilitate better targeted country-level research and reforms. Inadequate nutrition results in human and economic waste. 

In developing societies, substantial deaths are thought to be malnutrition-related, and large proportions of the population face the negative effects that inadequate diet and related illness have on learning, work capacity, behavior and well-being. Trade policy influences national food security trough both its effect on domestic production and imports, and also through the link with incomes and expenditures. However, only very few studies explicitly explore the impact of globalization on food security in developing countries.

The present study will employ a dynamic panel data approach to assess the overall (average) effect of globalization on poverty and food security in developing countries. Cross-sectoral and cross-country analysis helps strengthen the understanding of why people are food insecure, malnourished or hungry. The main objective of the current study is thus to gain insight into the issue of whether trade liberalization generally promotes growth and creates or alleviates poverty and food insecurity. Instead of applying random or fixed-effects OLS, which give rise to `dynamic panel bias’, the present study will employ the Generalized Method of Moments (GMM) procedure which accounts for both unobserved heterogeneity and endogeneity of the regressors and enables us to account for some of the dynamic aspects of trade reforms other approaches miss. The Difference and System GMM estimators are specifically designed for panel data analysis. Macroeconomic and structural variables should be considered as control variables. For example, inflation lowers purchasing power and may raise poverty or decrease food security.

 

Beginn: 01.08.2009
Projektleitung: Prof. Dr. Awudu Abdulai
Bearbeitung: Dipl.-Volskw. Jan Dithmer