Does Undernutrition Respond to Incomes and Prices? Dominance Tests for Indonesia

Abstract

Recent evidence suggests that food energy intakes of the poor respond less to income than was once thought. However, it is not intake alone that is of concern, but under-nutrition. Two facts confound assessments of how undernutrition responds to incomes and prices: individual nutrient requirements vary in a generally unobserved way, and intakes are observed with error. By modeling observed intake distributions econometrically, straightforward stochastic dominance tests can permit robust qualitative inferences about such responses. An application to Indonesia in the mid-1980s indicates that regional distributions of food energy intake are influenced by average income levels, intraregional inequalities, and local prices of staple food grains—all of which have unambiguous effects on undernutrition. The results suggest that any adverse effects on inequality of a growth process would need to be large to outweigh the desirable effect on undernutrition. In addition higher food staple prices still have adverse effects on undernutrition after allowing for their likely positive effects on rural incomes.

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