Global Nutrition Impacts of Rapid Economic Growth in China and India

Despite record global economic growth in past decade malnutrition remains a serious problem in many parts of the world. According to the United Nations' Food and Agriculture Organization (FAO), about 800 million people (17% of the world's population) remain malnourished. For these households at a subsistence level of income, changes in commodity market conditions, as may arise from changes in global economic growth and/or trade policy can have serious consequences for nutritional intake. Even a small decline in diet quality can have substantial adverse impacts on health status. On the other hand, a modest income boost, or lower food prices, could have extremely positive impacts. Previously, the links between changes in the global economy and nutritional outcomes have been explored by a relatively wide range of authors (e.g., Fang et al., 2006; Rosegrant et al., 2005). The goal of this paper is to offer modest extensions of this previous work in three directions. First of all, unlike many of the papers in the nutrition area, we seek to account for the behavioral response of low income households in the face of changing prices and incomes. Clearly when households are faced with a rise in the price of food products, they cannot afford to consume as much, ceteris paribus so consumption much adjust. The extent of this adjustment will depend on the change in real income and the Engel elasticities for each good. In addition, consumers are likely to substitute away from higher cost food items. All of these factors could have an adverse impact on nutritional attainment. By estimating and incorporating a demand system into our analysis, we are able to take these factors into account. In so doing, we draw on the work of Rimmer and Powell (1996) and Cranfield et al. (2003a; 2003b) in order to characterize consumer demands across the income spectrum. A second important extension embodied in this work relates to the impact of changes in factor earnings on household nutritional attainment in the wake of globalization. Most economic analyses of this issue have tended to focus on the commodity price impacts of globalization. If they have taken into account the earnings-side impacts, they have typically done so in a simplistic way. In this paper, we seek to capture the earnings-heterogeneity of poor households and thereby shed light on the differential impact of global economic growth on different household groups. We do so using the framework developed in Hertel et al. (2004), and further refined in Hertel et al. (2007a). The final contribution of this paper is to imbed this framework for analysis of nutritional issues into a widely used, global general equilibrium model (GTAP: Hertel, 1997) in order to permit nutritional outcomes to be routinely reported as part of standard economic analyses of global economic growth and trade liberalization. We illustrate this approach to the analysis of nutritional impacts of global economic growth through a series of globalization shocks, focusing on the impacts in Bangldesh. We begin by considering solely the impact of an exogenous rise in the consumer price rise for food products. This permits us to illustrate the mechanisms through which low income consumers respond to changing economic conditions in our framework. We then turn to an analysis of the impact of economic growth in India and China, respectively, on the poor in Bangladesh, and in particular on their nutritional attainment. Our findings indicate that the nutritional impacts of globalization depend importantly on the source of the globalization shock, and the resultant earnings effects on the poor.