Exit Seminar

Income Shocks, Intra Household Resource Allocation and Rice Consumption in a Major Rice Producing Country
Khondoker Abdul Mottaleb Postdoctoral Fellow Social Sciences Division (SSD) K.mottaleb@irri.org November 18, 2013

Poverty in the rice economies

Staple food. Major source of income Poverty is persistent in the major rice growing area Total extremely poor people (USD 1.25/day): 1 billion More than half of them live in major rice producing areas, particularly in SSA and SA. Improving livelihoods.

Emerging opportunity
Million tons milled rice
600

550

Additional rice needed: 116 million tons by 2035

546

500

450

450

400

2010 global rice production

350 300

19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 20 17 20 19 20 21 20 23 20 25 20 27 20 29 20 31 20 33 20 35

Asia

Africa

Americas

Rest of World

Real Challenges

Too much water

Too less water

Uncertainty in the Future

More threats

Source: Stern Review on the Economics of Climate, 2006

Futuristic Technology:C4 Rice

C3 Leaf (Rice) C4 Leaf (Sorghum)

Rice, tobacco

Maize, sorghum

C4 Supercharges Photosynthesis Using A Two Compartment CO2 Concentrating Mechanism

2011 Kharif Crop in Jajpur (Orissa)

Swarna-Sub1

Swarna

Drought tolerant rice is available

IR74371-70-1-1 has been developing targeting india as souvagi dhan. IR74371-54-1-1 has been developing targeting Philippines IR77080-B-34-3,IR81047-B-106- 3-4 identified promising in Mozambique. Sahbhagi dhan NSIC RC 192

Economic Benefits of a Drought Tolerant Rice Variety in South Asia Climate scenario NPV (million USD) Range of IRR %

Base
A2 A1B B1

2018.22
1960.77 1805.46 1557.79
*Using a 5% discount rate

0.26-0.54
0.13-0.59 0.17-0.43 0.17-0.57

Benefits of Development of Climate smart Rice

New Variety Existing variety Base World Milled Production (mt) 530.36 +2.21 +1.74 +1.63 -10.27 +5.67 +4.64 +1.13 -6.51 +3.98 +3.39 Nominal price (USD/Ton) 1107.50 -20.61 -7.43 South Asia Milled Production (mt) 163.47 +7.40 +6.18 159.77 +5.21 +5.16 Consumption (mt)

A2

A1B

B1

Full paper can be accessed at: http://ageconsearch.umn.edu/bitstream/124745/2/MottalebRev.pdf

Natural disasters-> income volatility of the rice farmers

Income volatility and Resource allocation

Income volatility and negative income shocks can hamper long run human capital development. Negative income shock can also have gender differentiated impacts (intra household resource allocation). Literature is scanty

China, Bangladesh, India are among the disaster prone countries

In terms of number killed, Bangladesh topped the list with an average of 15,000 people being killed each year during 1982-1991 period (World Disaster Report-IFRC, 1993)

Table 1: Major cyclonic storms from 19602010 that caused significant losses of lives and properties
Year 1960-1980 1981-1998 Barisal Chittagong Khulna 1 2 11 13 1 5 Total 13 20

1999-2010
Total

2
5

2
26

8
14

12
45

Source: BBS: Statistical Yearbook of Bangladesh, 2001 and 2010

Cyclone Aila, May 25-27, 2009

190 people were killed, more than 3.9 million people were affected (IFRCRC, 2010 ) Destroyed late boro and Aman rice in the field

Table 3: AILA affected districts

Group Experimental

Division Barisal

Khulna

Chittagong Control Chittagong

Severely damaged districts Barguna Barisal Bhola Jhalokati Patuakhali Pirojpur Bagerhat Khulna Satkhira Noakhali Not affected Comilla Chandpur Feni Laksmipur Chittagong Coxs Bazar

No. of people affected (000) 390 357 128 302 293 359 480 363 170 116 94 91 30 29 13.53 29.45

A priori Conjectures
The cyclone caused substantial loss in rice production Generated negative income shocks

Affected households need to reconstruct houses, seed beds and bunds. Small farm households may face liquidity constraints They need cash ! Employ children in farm work
Booming repairing and construction sector Wage rate increases Opportunity cost for schooling increased

Natural Experiment: double difference model

YDT

Affected= D2 Not affected =D1 T=2010 YD2 (10) YD1(10)

T-2005 YD2 (05) T=2000 YD2 (00) Change YD2 (00) -YD2
(05)

Difference YD1(10) - YD2 (10) YD1(05) - YD2 (05) YD1(00) - YD2 (00)

YD1(05) YD1(00)

-YD2 (10)

YD1(00)- YD1(05) (YD1(00) - YD2 (00) )-(YD1(05) - YD2 -YD1(10) (05))-(D1(2010) - YD2 (10))

Model Specification
Yit 0 1 (Year2005dummy) 2 (Year2010dummy) 3 ( AD) 4 ( AD * Year2005dummy)

5 ( AD * Year2010dummy) (Z i )i it

Y: dependent variables: Paddy income, consumption and expenditure on different items AD: equals 1 if a district is affected, 0 otherwise Z: demographic variables T: year

5 :the effect of the cyclone in the cyclone-affected

districts compared to other districts (the difference in the effect of cyclone AILA on Y between treatment and control groups)

Study 1
Major findings:

1. 2. 3. 4.

Substantial loss in rice production and income Non-food expenditure increased Health expenditure increased Schooling expenditure decreased (drop out/year loss) 5. School admission expenditure decreased

Study 2:Intra-Household Resource Allocation

Our empirical results confirmed that the cycloneaffected households spent less on their childrens schooling and childrens school admission than did the unaffected household
When they stopped sending children to school, whom did they stop? Boys or girls, or both? Why? Did they spend less on health issues of boys/girls?

Lets see our Conjectures once again!

Booming repairing and construction sector Wage rate increases Opportunity cost of schooling can increase Repairing and construction sector is generally male dominated Wage rate increases-> boys opportunity cost for schooling increases than girls School expenditure on boys declined substantially compared to the comparison group in 2010 Female secondary school stipend program

Intra-Household Resource Allocation under Negative Income Shock: A Natural Experiment

Health Crop income Male Female Male Education Female

Year 2005 dummy

Year 2010 dummy

A dummy for cycloneaffected district (=1)

16.12** (2.55) 21.13*** (3.36) 15.11*** (3.33)

-14.20** (-2.05) -17.18** (-2.59)

Cyclone-affected district X Year 2005 dummy Cyclone-affected district X Year 2010

-0.11 (-0.90) 0.21* (1.67) 0.53*** (-4.48) 0.45*** (2.83)

0.45*** (2.93)

-0.34** (-2.04) 0.35** (2.15) -0.80*** (-5.08)

0.74*** (3.47) 0.471** (2.31)

1.72*** (6.14) 2.87*** (10.35) 0.75*** (3.04)

-0.09 (-0.25) -0.81** (-2.51)

0.94*** (4.08) 1.88*** (8.29) 0.15 (0.73)

0.45 (1.59) -0.11 (-0.41)

Relationship between income and rice consumption

Million tons milled rice
600

550

Additional rice needed: 116 million tons by 2035

546

500

450

450

400

2010 global rice production

350

300
19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 20 17 20 19 20 21 20 23 20 25 20 27 20 29 20 31 20 33 20 35

Asia

Africa

Americas

Rest of World

The Demand for Cereals in Bangladesh: An Almost Ideal Demand Estimation

In 2000, GDP per capita: $363 In 2011 : $734 (more than 100% increased) How this income growth affected rice consumption? Estimated income and price elasticities considering six major commodities: rice, wheat, rice and wheat products, fish lentil, and vegetables. HIES data 2000, 2005, 2010 Number of households: 29760

Yearly per capita consumption (KG)

Year Rice Rice and wheat products Wheat 2000 164.25 4.43 7.04 2005 161.90 6.78 5.21 2010 150.95 8.08 10.43

Lentil
Fish Vegetables

6.00
14.86 76.65

5.48
16.43 86.04

5.48
18.77 91.51

The Model

Where Wi= expenditure share on commodity i (piqi/M) M= total expenditure on sampled commodities Z= household demographics Two stage budgeting method applied

Expenditure (income) elasticities

Rice Rice and wheat products
3.86 3.02 2.46 2.87

Wheat

Pulse

Fish

Vege.

2000 2005

0.55 0.56 0.47 0.53

1.47 1.56 1.37 1.45

-0.16 -0.34 -0.06 -0.17

3.05 3.13 2.21 2.62

-0.19 -0.34 -0.57 -0.38

2010 Averag e

Price elasticity
Hicksian Year Rice Rice and wheat products Wheat Pulses Fish Vegetables 2000 -0.10 -0.11 2005 -0.11 -0.34 2010 -0.09 -0.45 2000 -0.41 -0.23 Marshallian 2005 -0.43 -0.48 2010 -0.30 -0.60

-2.50 -0.67 -0.28 -0.62

-2.88 -0.63 -0.37 -0.62

-2.27 -0.68 -0.30 -0.53

-2.53 -0.66 -0.86 -0.60

-2.91 -0.62 -0.95 -0.57

-2.30 -0.68 -0.98 -0.46

Findings
Income elasticity is large in absolute size and positive Rice is a normal and necessary commodity. STRICTLY NOT an INFERIOR commodity. In future, total rice consumption in Bangladesh will increase.

I would like to thank

Rodrick M. Rejesus, NC State A.K. Mishra, LSU V. Pede Andy Nelson MVR Murty Tao Li Imelda Molina Harold. G. Valera Murali K. Gumma H. Bhandari, D. Matty Prof. Y. Chito and Tin Tin Malu and Rio

Thanks for your support to me always

Tita Mirla and Friend Dehner

Thanks to Dr. S. Mohanty

Please dont say good bye but please say see you again