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FOOD SECURITY
 Concepts, Basic Facts,
and Measurement Issues

     June 26 to July 7, 2006
       Dhaka, Bangladesh
Rao 5b:
        Policies for Raising
        Food Entitlements
Learning: The learning goal is to develop the ability to
identify both direct and indirect policy options for raising
food entitlements of the food-insecure population, with a
focus on the variety of targeted and non-targeted
programmed options.
Brief Contents
• poverty reduction, entitlements, safety nets and FS
• targeted policy interventions to improve access to food
• impact path of targeted interventions
• targeted asset distribution and production support
• public works, their assessment and their cost-effectiveness
• food for work programmes
• special and supplemental feeding programmes
• targeted food subsidies: geographical and commodity
  targeting
• fair price and ration shops; food stamps
Poverty And Food Entitlements:
            Access to Food
•  Insufficient access is often crucial problem, not a general
   shortage of food
•  Access to adequate food as a prerequisite for FS applies to the
   national as well as the individual HH level.
NATIONAL LEVEL
•  With a production deficit, national access depends on
   availability of foreign exchange (import capacity) which may
   be limited due to debt service burdens and chronic balance of
   payments deficits
•  Thus, improved national access depends on
    –   BOTH maintaining macro balance and growth of foreign earnings
    –   AND an international financial and trade regime that is favourable to
        poor, food-dependent countries
Access to Food: HH Level
•   HH access depends on food entitlements
•   FIS occurs if means are insufficient and so is
    directly related to poverty
•   Targeted approaches will be required to
    support the vulnerable, a group larger than the
    actually poor or food-deficient (see Table)
Targeted policy interventions to
            improve access to food

 Type of interventions                Target groups                Impact on food entitlements
Targeted asset distribution Small farmers,                       Increased AG income = increased
        e.g., land reform Subsistence farmers,                     HH food demand
                            Tenant farmers, Urban poor           Increased HH food supplies from
                            Poor (sub-) urban dwellers           subsistence production
Public works                Rural landless,                      Increased cash income =increased
Food-for-work (FFW)         Rural and urban poor, un- and          HH food demand;
                              under-employed                     Increased income in kind of food =
                                                                   increased HH food supplies
Targeted food subsidies    Urban poor                            Increased real income due to lower
e.g. fair price shops      Rural poor                              food prices = increased HH food
                           Specific vulnerable groups            demand
Direct food transfers      Specific vulnerable groups, e.g.      Increased individual and/or
e.g. relief assistance     displaced, disaster-affected, female    HH food supplies through
                           headed HH, underweight children, etc.   direct food transfers
Impact path of targeted interventions on
  factors determining access to food
Targeted Asset Distribution and
         Production Support
•    These can include all measures with two features:
1) the measures address specific constraints that the vulnerable or
     FIS AG producers face;
2) the measures are effective in reaching the target group(s).
•    This requires:
1) Identification of the target groups;
2) Identification of the constraints faced to increased production;
3) Design of appropriate measures to overcome the constraints;
4) Implementation of the programme;
5) Monitoring of the programme performance.
•    To keep cost-effectiveness ratio in control, coverage of the
     targeted group must be high.
The Arithmetic of Cost-Effectiveness
         in Public Works
 Assume that a programme begins in a region in which 1,000 HHs subsist on an
 average of $1 a day and other HHs earn in excess of $2 a day. We want to raise
 HH income of the first to at least $2 a day. Further assume that working in the
 programme costs participants 50 cents a day out-of-pocket for added food,
 travel, etc. A wage of $2.50 would then be enough to attract the target
 population and keep away other workers who earn more than $2 a day. If the
 value of a day's work performed under the programme is $2.50 and it costs
 $3.50 for wages and materials, the public cost of augmenting incomes is $1. For
 each dollar spent on the programme, the target population's income would
 increase by $1. If the value of a day's work were $3, each dollar spent on
 augmenting income would increase the target population's income by $2.
 Clearly, this programme would be cost-effective.
 Public works programs rarely achieve this cost-effectiveness. If the value of a
 day's work were $1 rather than $2.50, it would cost the state $2.50 for each
 dollar of income transferred to the target population. If the daily wage offered
 were $3.50 rather than $2.50, the programme would attract many workers from
 outside the target population. It might then cost the state as much as $5 to $10
 to augment the income of the people in the target population by $1 a day.
Public Works Programmes
PWP are the main type of targeted interventions with
  people paid in cash or food
Four categories of public work projects can be
  distinguished
• Emergency relief projects, providing temporary (food) wage
  employment to supplement/replace crisis-induced income loss
• Seasonal projects, aimed at supplementing the income of poor
  HHs during slack AG seasons
• Regular infrastruc, projects aimed to create productive assets
  while tapping surplus labor & giving employment for poor HH
• Long-term employment-generation projects, designed to tackle
  chronic un- and under-employment by offering continuous job
  opportunities, particularly to the urban poor and the landless.
Assessment of PWPs
•   Compared to other forms of targeted
    assistance, PWPs have 2 additional advantages:
•   assets created through e.g. rural roads, dams, land
    conservation
•   self-targeting nature, if properly designed: attract
    only those who have no alternative source of income
    and employment.
•   Targeting is effective only if those employed are paid
    below market wages. Else, it would attract the non-
    poor or the not-unemployed.
Assessment of PWPs (contd)
• Cost-effectiveness depends on: net income the target
  group derives and on value of the works performed or
  assets created compared to the costs of the PWP.
• But cost-effectiveness must be considered not in itself
  but in conjunction with assistance given to vulnerable
  groups.
• Only projects which can absorb a large amount of
  unskilled labour are suitable for implementation under
  public works arrangements.
Food-for-Work (FFW)
• FFW projects are a special type of PWS where payment
  to the employed is in food.
• Rationale: combination of employment creation, FS
  and development objectives.
• Often, main reason comes from food aid provided by
  external donors.
• Extensive debate about appropriate form of payment:
  cash or kind. Even with food aid, this can be
  monetized. Monetisation means the food is sold and
  the funds used to finance PWP.
Food-for-Work – contd.
• FFW participants usually sell part of the food received
  to have cash for non-food needs. With large FFW
  programmes, this 'informal monetisation' can depress
  food prices. This, again, depresses the participants' own
  real income (lower value of the food received) and
  farmers' income in the area.
• The need to avoid the negative effects of monetization
  and lacking clear case for one or other form of
  payment, the optimal solution may be a combination of
  both.
Targeted Food Subsidies
• Given their high fiscal costs and market distorting
  effects, general food subsidies are often replaced by
  targeted subsidies.
• These are designed to reach needy groups. This can
  yield substantial fiscal savings while maintaining
  benefits to the poor and vulnerable.
• However, targeting also incurs special costs and has
  specific infrastructural requirements i.e., need to screen
  beneficiaries, to set up special distribution network, and
  for effective administration and monitoring.
More on Targeted Food Subsidies
• Trade-off between administrative costs and leakage of
  subsidy to non-target groups.
• Targeting may also cause social friction and political
  problems, as targeting always means that certain
  population groups are excluded from the subsidies.
• The effects of food subsidies on HH FS result from a
  real income and a substitution effect. Both imply
  increased HH food demand.
• Food subsidies may be targeted geographically, by
  commodity, through a special distribution network (fair
  price shops/ration shops), food stamps.
Geographical targeting
• Subsidies are exclusively directed to areas where vulnerable
  groups are concentrated. These could be the urban/suburban
  housing and squatter areas of poor families, or rural areas with
  acute, seasonal or chronic food shortages.
• Simple geographical targeting involves low administrative costs
  but will also benefit those HHs in the area who are less poor and
  not affected by food shortages.
• To avoid this, geographical targeting may be combined with an
  additional targeting method, e.g. ration cards for poor HHs only.
  But this will raise administrative costs.
Targeting by commodity
• Targeting by commodity can be applied where poor and non-
  poor groups have different consumption patterns e.g., coarse
  grains, roots and tubers VS fine grains.
• Subsidies on "inferior" commodities are self-targeting and so
  cost-effective.
• To prevent misuse as animal feed, etc., safeguards (e.g quantity
  restrictions, food stamps) can help.
• But if aim is to make good certain nutritional deficiencies (e.g.
  protein deficiencies of children and mothers) with suitable food
  commodities (e.g. milk, dairy products), then, commodity
  targeting will be inappropriate or insufficient.
Fair price/ration shops
• Fair price/ration shops are special outlets for the sale of
  subsidised commodities.
• They can be a form of geographical targeting. Finer
  targeting can be achieved with rules concerning types
  and quantities of commodities .
• Compared to other approaches to targeted
  subsidies, additional costs accrue from the need to set
  up and to manage a particular distribution system. Such
  costs are largely avoided in the case of a food stamp
  programme, as discussed in the following section.
Food stamps
• Food stamps target subsidies by distributing coupons to eligible
   groups and can be used to buy set commodities in specific shops
   and the retailer refunded against the stamps.
• Beneficiaries can choose from a range of commodities so
   coupons have a "near-money" property. Food stamps can be
   both cost-effective and an attractive alternative to general food
   subsidies.
• Crucial difficulties with food stamps include:
1) Beneficiaries must be identified and registered. This is generally
   insurmountable in many poor countries.
2) They can be financially abused.
3) Inflation can rapidly erode food stamp values.
Direct food transfers
Direct food transfers mean a free distribution of food
  rations to the beneficiaries through a particular
  distribution network.
Free distribution of relief rations
• Necessary in the wake of natural or man-made disasters
  at least as a transition measure.
• Targeting is usually best achieved if daily rations are
  distributed. But this is administratively costly and
  requires the beneficiaries to come to the distribution
  centre every day.
Special/supp. feeding programmes
• Effective when targeted to high risk individuals, such as children,
  pregnant and nursing mothers, old and sick people.
• Administratively intensive in terms of screening and reaching
  eligible people. Existing institutions such as health centres or
  schools are used for distribution.
• Sometimes special food distribution or feeding centres need to
  be established to minimize leakage within HHs.
• But if the whole family is FIS, some such intra-family leakage
  may be a small price to pay to give nutritional benefits for the
  other HH members.
• School feeding programmes can provide an effective channel for
  distributing food to children of low-income families and an
  incentive for such families to send their children to school.

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Rao 5b policies for raising food entitlements

  • 1. FOOD SECURITY Concepts, Basic Facts, and Measurement Issues June 26 to July 7, 2006 Dhaka, Bangladesh
  • 2. Rao 5b: Policies for Raising Food Entitlements Learning: The learning goal is to develop the ability to identify both direct and indirect policy options for raising food entitlements of the food-insecure population, with a focus on the variety of targeted and non-targeted programmed options.
  • 3. Brief Contents • poverty reduction, entitlements, safety nets and FS • targeted policy interventions to improve access to food • impact path of targeted interventions • targeted asset distribution and production support • public works, their assessment and their cost-effectiveness • food for work programmes • special and supplemental feeding programmes • targeted food subsidies: geographical and commodity targeting • fair price and ration shops; food stamps
  • 4. Poverty And Food Entitlements: Access to Food • Insufficient access is often crucial problem, not a general shortage of food • Access to adequate food as a prerequisite for FS applies to the national as well as the individual HH level. NATIONAL LEVEL • With a production deficit, national access depends on availability of foreign exchange (import capacity) which may be limited due to debt service burdens and chronic balance of payments deficits • Thus, improved national access depends on – BOTH maintaining macro balance and growth of foreign earnings – AND an international financial and trade regime that is favourable to poor, food-dependent countries
  • 5. Access to Food: HH Level • HH access depends on food entitlements • FIS occurs if means are insufficient and so is directly related to poverty • Targeted approaches will be required to support the vulnerable, a group larger than the actually poor or food-deficient (see Table)
  • 6. Targeted policy interventions to improve access to food Type of interventions Target groups Impact on food entitlements Targeted asset distribution Small farmers, Increased AG income = increased e.g., land reform Subsistence farmers, HH food demand Tenant farmers, Urban poor Increased HH food supplies from Poor (sub-) urban dwellers subsistence production Public works Rural landless, Increased cash income =increased Food-for-work (FFW) Rural and urban poor, un- and HH food demand; under-employed Increased income in kind of food = increased HH food supplies Targeted food subsidies Urban poor Increased real income due to lower e.g. fair price shops Rural poor food prices = increased HH food Specific vulnerable groups demand Direct food transfers Specific vulnerable groups, e.g. Increased individual and/or e.g. relief assistance displaced, disaster-affected, female HH food supplies through headed HH, underweight children, etc. direct food transfers
  • 7. Impact path of targeted interventions on factors determining access to food
  • 8. Targeted Asset Distribution and Production Support • These can include all measures with two features: 1) the measures address specific constraints that the vulnerable or FIS AG producers face; 2) the measures are effective in reaching the target group(s). • This requires: 1) Identification of the target groups; 2) Identification of the constraints faced to increased production; 3) Design of appropriate measures to overcome the constraints; 4) Implementation of the programme; 5) Monitoring of the programme performance. • To keep cost-effectiveness ratio in control, coverage of the targeted group must be high.
  • 9. The Arithmetic of Cost-Effectiveness in Public Works Assume that a programme begins in a region in which 1,000 HHs subsist on an average of $1 a day and other HHs earn in excess of $2 a day. We want to raise HH income of the first to at least $2 a day. Further assume that working in the programme costs participants 50 cents a day out-of-pocket for added food, travel, etc. A wage of $2.50 would then be enough to attract the target population and keep away other workers who earn more than $2 a day. If the value of a day's work performed under the programme is $2.50 and it costs $3.50 for wages and materials, the public cost of augmenting incomes is $1. For each dollar spent on the programme, the target population's income would increase by $1. If the value of a day's work were $3, each dollar spent on augmenting income would increase the target population's income by $2. Clearly, this programme would be cost-effective. Public works programs rarely achieve this cost-effectiveness. If the value of a day's work were $1 rather than $2.50, it would cost the state $2.50 for each dollar of income transferred to the target population. If the daily wage offered were $3.50 rather than $2.50, the programme would attract many workers from outside the target population. It might then cost the state as much as $5 to $10 to augment the income of the people in the target population by $1 a day.
  • 10. Public Works Programmes PWP are the main type of targeted interventions with people paid in cash or food Four categories of public work projects can be distinguished • Emergency relief projects, providing temporary (food) wage employment to supplement/replace crisis-induced income loss • Seasonal projects, aimed at supplementing the income of poor HHs during slack AG seasons • Regular infrastruc, projects aimed to create productive assets while tapping surplus labor & giving employment for poor HH • Long-term employment-generation projects, designed to tackle chronic un- and under-employment by offering continuous job opportunities, particularly to the urban poor and the landless.
  • 11. Assessment of PWPs • Compared to other forms of targeted assistance, PWPs have 2 additional advantages: • assets created through e.g. rural roads, dams, land conservation • self-targeting nature, if properly designed: attract only those who have no alternative source of income and employment. • Targeting is effective only if those employed are paid below market wages. Else, it would attract the non- poor or the not-unemployed.
  • 12. Assessment of PWPs (contd) • Cost-effectiveness depends on: net income the target group derives and on value of the works performed or assets created compared to the costs of the PWP. • But cost-effectiveness must be considered not in itself but in conjunction with assistance given to vulnerable groups. • Only projects which can absorb a large amount of unskilled labour are suitable for implementation under public works arrangements.
  • 13. Food-for-Work (FFW) • FFW projects are a special type of PWS where payment to the employed is in food. • Rationale: combination of employment creation, FS and development objectives. • Often, main reason comes from food aid provided by external donors. • Extensive debate about appropriate form of payment: cash or kind. Even with food aid, this can be monetized. Monetisation means the food is sold and the funds used to finance PWP.
  • 14. Food-for-Work – contd. • FFW participants usually sell part of the food received to have cash for non-food needs. With large FFW programmes, this 'informal monetisation' can depress food prices. This, again, depresses the participants' own real income (lower value of the food received) and farmers' income in the area. • The need to avoid the negative effects of monetization and lacking clear case for one or other form of payment, the optimal solution may be a combination of both.
  • 15. Targeted Food Subsidies • Given their high fiscal costs and market distorting effects, general food subsidies are often replaced by targeted subsidies. • These are designed to reach needy groups. This can yield substantial fiscal savings while maintaining benefits to the poor and vulnerable. • However, targeting also incurs special costs and has specific infrastructural requirements i.e., need to screen beneficiaries, to set up special distribution network, and for effective administration and monitoring.
  • 16. More on Targeted Food Subsidies • Trade-off between administrative costs and leakage of subsidy to non-target groups. • Targeting may also cause social friction and political problems, as targeting always means that certain population groups are excluded from the subsidies. • The effects of food subsidies on HH FS result from a real income and a substitution effect. Both imply increased HH food demand. • Food subsidies may be targeted geographically, by commodity, through a special distribution network (fair price shops/ration shops), food stamps.
  • 17. Geographical targeting • Subsidies are exclusively directed to areas where vulnerable groups are concentrated. These could be the urban/suburban housing and squatter areas of poor families, or rural areas with acute, seasonal or chronic food shortages. • Simple geographical targeting involves low administrative costs but will also benefit those HHs in the area who are less poor and not affected by food shortages. • To avoid this, geographical targeting may be combined with an additional targeting method, e.g. ration cards for poor HHs only. But this will raise administrative costs.
  • 18. Targeting by commodity • Targeting by commodity can be applied where poor and non- poor groups have different consumption patterns e.g., coarse grains, roots and tubers VS fine grains. • Subsidies on "inferior" commodities are self-targeting and so cost-effective. • To prevent misuse as animal feed, etc., safeguards (e.g quantity restrictions, food stamps) can help. • But if aim is to make good certain nutritional deficiencies (e.g. protein deficiencies of children and mothers) with suitable food commodities (e.g. milk, dairy products), then, commodity targeting will be inappropriate or insufficient.
  • 19. Fair price/ration shops • Fair price/ration shops are special outlets for the sale of subsidised commodities. • They can be a form of geographical targeting. Finer targeting can be achieved with rules concerning types and quantities of commodities . • Compared to other approaches to targeted subsidies, additional costs accrue from the need to set up and to manage a particular distribution system. Such costs are largely avoided in the case of a food stamp programme, as discussed in the following section.
  • 20. Food stamps • Food stamps target subsidies by distributing coupons to eligible groups and can be used to buy set commodities in specific shops and the retailer refunded against the stamps. • Beneficiaries can choose from a range of commodities so coupons have a "near-money" property. Food stamps can be both cost-effective and an attractive alternative to general food subsidies. • Crucial difficulties with food stamps include: 1) Beneficiaries must be identified and registered. This is generally insurmountable in many poor countries. 2) They can be financially abused. 3) Inflation can rapidly erode food stamp values.
  • 21. Direct food transfers Direct food transfers mean a free distribution of food rations to the beneficiaries through a particular distribution network. Free distribution of relief rations • Necessary in the wake of natural or man-made disasters at least as a transition measure. • Targeting is usually best achieved if daily rations are distributed. But this is administratively costly and requires the beneficiaries to come to the distribution centre every day.
  • 22. Special/supp. feeding programmes • Effective when targeted to high risk individuals, such as children, pregnant and nursing mothers, old and sick people. • Administratively intensive in terms of screening and reaching eligible people. Existing institutions such as health centres or schools are used for distribution. • Sometimes special food distribution or feeding centres need to be established to minimize leakage within HHs. • But if the whole family is FIS, some such intra-family leakage may be a small price to pay to give nutritional benefits for the other HH members. • School feeding programmes can provide an effective channel for distributing food to children of low-income families and an incentive for such families to send their children to school.