Under-nutrition in the world/Steven Levit+Jenson article on Giffen Goods
9/30/2009

While famine may be history, malnutrition is not
  - UN estimates that a billion worldwide are under-nourished
  - India has 40% children under-nourished
  - Symptoms of malnutrition: anemia, low BMI (weight/height^2), small 
    and thin children (compared to well-nourished American children)

2006-2008->Fast increase in food prices, mostly due to cost of oil
  - fertalizer became more expensive (oil-based)
  - ethanol production went up, taking away lots of corn
  - 2009, price dropped, but in general trend of oil price is up
  - big consequences on poor who are net consumers of food (e.g., urban poor),
    who produce less food than they consume.

Two consequences of these poor
  - they are disproportionately going to eat less food, since they spend more
    of their money on food
  - decrease in nutritional value, starting a vicious cycle

While the share of food in the poor's budget is high, poor have two margins
  to increase their consumption
    - spend more on food (instead of alcohol, tobacco)
    - buy different/cheaper goods

To see what is actually happening, compare calorie consumption of people at
  different income/consumption, by seeing how much food was consumed last
  month/week vs. today

Compare people who are richer (log of per-capita outlay) vs people who consume
  more calories (log of per-capita calorie consumption)
When wealth increases by 10%, caloric consumption increases by 3.5% (beauty of
  log-log plots)
  This means that the share of per-capita income spent on food goes down
    as you make more food.  Originally observed by sociologist called Engel
    (Engel Curve)

Price elasticity of food budget vs. income is .7 (70% of extra money is spent on
  food).  Price elasticity of calories vs. income is .35 (35% more calories
  are purchased, meaning calories are getting more expensive)
  - Also, it's not just for adding calories.  Marginal money made is spent on
    more expensive, more luxurious food
  - Poor buy more of cheaper foods (meat vs cereals)
  - Additionally, rich spend more money on the same food group (buy more
    expensive cereal)
  - Even among very poor, increase in economic well-being has a positive but
    not huge impact on nutrition

Jensen blog entries on Giffen Goods
  - Increase in price leads to increase in demand (consumption decreases when
    price decreases)
  - Only basic products can be giffen goods
    - basic: takes a large proportion of your budget, and you can't replace it
      for another item for sustenance
  - Two effects when price of a good decreases
    - Income effect---same ammt of money gets you more than before
    - Substitution effect---people switch to the cheaper item from more expensive
      substitutes
  - For most goods, substitution effect dominates income effect, but for giffen
    goods, income effect is stronger.

How they uncovered a Giffen good
  - Initially, found an open dataset that showed correlation between price of
    rice and demand for rice.
  - Didn't know causality: Did increased demand lead to increased price, or
    vice versa?
  - Went for rice (south) and wheat (north) china.  Wheat failed, because they
    subsidized wheat flour, not processed wheat (noodles, etc.)
  - Subsidized an over-estimate of consumption, to make sure that they didn't
    subsidize a subset of consumption, and the marginal kilo of rice is bought
    at full price.
  - Make sure people can't exchange/sell their vouchers, or else you can't
    conclude about the subsidized good.
  - Main result: Hunan---when price of rice decreases by 10%, there is a 2.4%
    reduction in quantity of rice purchases.  10% decrease in rice price
    leads to 4.8% increase in seafood purchases (shrimp, which are less
    nutritious!)

Implications for nutrition
  - Many countries (India+Egypt) have a national subsidy scheme for the poor
    in rice-consuming regions
  - If households consume less rice (and more shrimp in China) but shrimps are
    not very nutritious in dollars spent, the effect on calorie consumption
    of subsidizing rice may not be large, and it may even be negative.
  - Income effect of rice consumed in this case is negative, at least in
    China.  Maybe that's not the case in India, but let's dig deeper.

The Engel curve implies that richer people eat more.  But this doesn't
  mean that giving more money to poor people will make them eat more.
Also, the Engel curve changes over time.  In india, it's positively increasing
  (more income means more consumption), but the slope goes down, and
  since the '80's even though Indians are making more money (less poor people),
  they overall consume less calories!  Childhood malnutrition has also
  gotten worse!

So maybe income effect is negative!

The puzzle of food consumption
  - Why are households eating little (by measuig calories, weight, anemia) not
    using opportunities to eat more or feed children more?
     -> Households may not see the benefits of the increased income, don't
        understand how nutrition helps
     -> Maybe the benefits are distant in the future, and we have to measure them
        in a long time
     -> Or maybe it's not worthwhile if all the extra food gives you is the
        choice to continue to eat bad-tasting food ("life is too short")
     -> Perhaps people adjust to lower calories, and increase in money makes
        them have to work less hard, and they go on without consuming more.
  - While the impact of improved nutrition are larger for children,
    children don't make the decisions, and the information is harder to give to
    them.  To get around this, try giving kids food directly, rather than
    subsidizing the food, since parent may not "wisely" use money.
  - Don't always assume the policy will work!