Soaring food prices and food security: Does the income effect matter?

Abstract

While the existing literature on rising food prices in recent years has mainly focused on the causes and calculating the number of people falling below the poverty line in developing countries, less attention has been paid to rising food prices and food security in terms of calorie intake. The main objective of this study is to fill this gap using a case study of a developing country, Sri Lanka. In this study, we estimate the change in individual calorie intake associated with food inflation using the Stone–Geary utility function. The impact at national level is assessed using a calorie intake distribution curve. The results demonstrate that the percentage of undernourished population in Sri Lanka is expected to rise rapidly with food inflation on the basis that there is no income increase during the period under consideration. However, the rise in undernourished population is remarkably low when the income effect is taken into consideration.

Keywords:

• food security
• Stone–Geary utility function
• food inflation
• Sri Lanka

JEL Classification:

• I30
• P46

Notes

¹ See Martínez-Espiñeira and Nauges (2004) and Garcia-Valinas et al. (2010).

² Typically, we can construct an expenditure system for food using Equations 3(3) and 4(4) and derive the fifth equation as the difference of expenditure rather than food quantity. Thereafter, we can convert expenditures into calories. Such an approach, however, also yields the same relationship as presented in Equation 4.(4)

³ Household Income and Expenditure Survey (HIES) 2006/2007 provides the expenditure of average individual's food basket and the amount of calories that food basket contains for that survey period.

⁴ Log-normal distribution is the most widely used distribution for estimating the prevalence of undernourishment in total population.