Distributional and nutritional impact of devaluation in Rwanda

Economic Development and Cultural Change

Volumn 46, Issue 2, 1998, Pages 378-402

  Minot, Nicholas W ^a  

^a INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

DEVELOPING COUNTRY; INCOME DISTRIBUTION; MONETARY DEVALUATION; NUTRITIONAL INTAKE; PRICE CHANGES;

RWANDA;

EID: 0031804164     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452343     Document Type: Article

References (52)

1. See, e.g., P. Krugman and L. Taylor, "Contractionary Effects of Devaluation," Journal of International Economics 8 (1978): 445-56; M. Miles, "The Effects of Devaluation on the Trade Balance and the Balance of Payments: Some New Results," Journal of Political Economy 87 (October 1979): 600-20; M. Godfrey, "Trade and Exchange Rate Policy in Sub-Saharan Africa," Institute for Development Bulletin 16 (1985): 31-38; and G. Cornia, R. Jolly, and R. Jolly, eds., Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth (Oxford: Clarendon, 1987).
2. See, e.g., P. Krugman and L. Taylor, "Contractionary Effects of Devaluation," Journal of International Economics 8 (1978): 445-56; M. Miles, "The Effects of Devaluation on the Trade Balance and the Balance of Payments: Some New Results," Journal of Political Economy 87 (October 1979): 600-20; M. Godfrey, "Trade and Exchange Rate Policy in Sub-Saharan Africa," Institute for Development Bulletin 16 (1985): 31-38; and G. Cornia, R. Jolly, and R. Jolly, eds., Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth (Oxford: Clarendon, 1987).
3. See, e.g., P. Krugman and L. Taylor, "Contractionary Effects of Devaluation," Journal of International Economics 8 (1978): 445-56; M. Miles, "The Effects of Devaluation on the Trade Balance and the Balance of Payments: Some New Results," Journal of Political Economy 87 (October 1979): 600-20; M. Godfrey, "Trade and Exchange Rate Policy in Sub-Saharan Africa," Institute for Development Bulletin 16 (1985): 31-38; and G. Cornia, R. Jolly, and R. Jolly, eds., Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth (Oxford: Clarendon, 1987).
4. See, e.g., P. Krugman and L. Taylor, "Contractionary Effects of Devaluation," Journal of International Economics 8 (1978): 445-56; M. Miles, "The Effects of Devaluation on the Trade Balance and the Balance of Payments: Some New Results," Journal of Political Economy 87 (October 1979): 600-20; M. Godfrey, "Trade and Exchange Rate Policy in Sub-Saharan Africa," Institute for Development Bulletin 16 (1985): 31-38; and G. Cornia, R. Jolly, and R. Jolly, eds., Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth (Oxford: Clarendon, 1987).
5. For recent studies, see K. Doroodian, "Macroeconomic Performance and Adjustment under Policies Commonly Supported by the International Monetary Fund," Economic Development and Cultural Change 41 (July 1993): 849-64; T. Gylfason and M. Radetzki, "Does Devaluation Make Sense in the Least Developed Countries?" Economic Development and Cultural Change 40 (October 1991): 1-25; S. Edwards, "Are Devaluations Contractionary?" Review of Economics and Statistics 68 (October 1986): 501-8; and S. Kamin, Devaluation, External Balance, and Macroeconomic Performance: A Look at the Numbers, Princeton Studies in International Finance, no. 62 (Princeton, N.J.: Princeton University, 1988). A review of the literature is provided by S. Edwards, Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Mass.: MIT Press, 1989).
6. For recent studies, see K. Doroodian, "Macroeconomic Performance and Adjustment under Policies Commonly Supported by the International Monetary Fund," Economic Development and Cultural Change 41 (July 1993): 849-64; T. Gylfason and M. Radetzki, "Does Devaluation Make Sense in the Least Developed Countries?" Economic Development and Cultural Change 40 (October 1991): 1-25; S. Edwards, "Are Devaluations Contractionary?" Review of Economics and Statistics 68 (October 1986): 501-8; and S. Kamin, Devaluation, External Balance, and Macroeconomic Performance: A Look at the Numbers, Princeton Studies in International Finance, no. 62 (Princeton, N.J.: Princeton University, 1988). A review of the literature is provided by S. Edwards, Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Mass.: MIT Press, 1989).
7. For recent studies, see K. Doroodian, "Macroeconomic Performance and Adjustment under Policies Commonly Supported by the International Monetary Fund," Economic Development and Cultural Change 41 (July 1993): 849-64; T. Gylfason and M. Radetzki, "Does Devaluation Make Sense in the Least Developed Countries?" Economic Development and Cultural Change 40 (October 1991): 1-25; S. Edwards, "Are Devaluations Contractionary?" Review of Economics and Statistics 68 (October 1986): 501-8; and S. Kamin, Devaluation, External Balance, and Macroeconomic Performance: A Look at the Numbers, Princeton Studies in International Finance, no. 62 (Princeton, N.J.: Princeton University, 1988). A review of the literature is provided by S. Edwards, Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Mass.: MIT Press, 1989).
8. For recent studies, see K. Doroodian, "Macroeconomic Performance and Adjustment under Policies Commonly Supported by the International Monetary Fund," Economic Development and Cultural Change 41 (July 1993): 849-64; T. Gylfason and M. Radetzki, "Does Devaluation Make Sense in the Least Developed Countries?" Economic Development and Cultural Change 40 (October 1991): 1-25; S. Edwards, "Are Devaluations Contractionary?" Review of Economics and Statistics 68 (October 1986): 501-8; and S. Kamin, Devaluation, External Balance, and Macroeconomic Performance: A Look at the Numbers, Princeton Studies in International Finance, no. 62 (Princeton, N.J.: Princeton University, 1988). A review of the literature is provided by S. Edwards, Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Mass.: MIT Press, 1989).
9. For recent studies, see K. Doroodian, "Macroeconomic Performance and Adjustment under Policies Commonly Supported by the International Monetary Fund," Economic Development and Cultural Change 41 (July 1993): 849-64; T. Gylfason and M. Radetzki, "Does Devaluation Make Sense in the Least Developed Countries?" Economic Development and Cultural Change 40 (October 1991): 1-25; S. Edwards, "Are Devaluations Contractionary?" Review of Economics and Statistics 68 (October 1986): 501-8; and S. Kamin, Devaluation, External Balance, and Macroeconomic Performance: A Look at the Numbers, Princeton Studies in International Finance, no. 62 (Princeton, N.J.: Princeton University, 1988). A review of the literature is provided by S. Edwards, Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Mass.: MIT Press, 1989).
10. O. Johnson and J. Salope, "Distributional Aspects of Stabilization Programs in Developing Countries," International Monetary Fund Staff Papers 27 (1980): 1-23.
11. J. de Melo and S. Robinson, "Trade Adjustment Policies and Income Distribution in Three Archetypal Developing Economies," Journal of Development Economics 10 (1982): 67-92; A. de Janvry, A. Fargeix, and E. Sadoulet, "The Welfare Effects of Stabilization Policies and Structural Adjustment Programs Analyzed in Computable General Equilibrium Framework," in Macroeconomic Policy Reform, Poverty, and Nutrition: Analytical Methodologies, ed. P. Pinstrup-Anderson, Cornell Food and Nutrition Policy Program, Monograph 3 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); F. Bourguignon, J. de Melo, and C. Morrison, "Poverty and Income Distribution during Adjustment: Issues and Evidence from the OECD Project," World Development 19 (November 1991): 1485-1508; and L. Taylor, ed., Socially Relevant Policy Analysis: Structural Computable General Equilibrium Models for the Developing World (Cambridge, Mass.: MIT Press, 1990).
12. J. de Melo and S. Robinson, "Trade Adjustment Policies and Income Distribution in Three Archetypal Developing Economies," Journal of Development Economics 10 (1982): 67-92; A. de Janvry, A. Fargeix, and E. Sadoulet, "The Welfare Effects of Stabilization Policies and Structural Adjustment Programs Analyzed in Computable General Equilibrium Framework," in Macroeconomic Policy Reform, Poverty, and Nutrition: Analytical Methodologies, ed. P. Pinstrup-Anderson, Cornell Food and Nutrition Policy Program, Monograph 3 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); F. Bourguignon, J. de Melo, and C. Morrison, "Poverty and Income Distribution during Adjustment: Issues and Evidence from the OECD Project," World Development 19 (November 1991): 1485-1508; and L. Taylor, ed., Socially Relevant Policy Analysis: Structural Computable General Equilibrium Models for the Developing World (Cambridge, Mass.: MIT Press, 1990).
13. J. de Melo and S. Robinson, "Trade Adjustment Policies and Income Distribution in Three Archetypal Developing Economies," Journal of Development Economics 10 (1982): 67-92; A. de Janvry, A. Fargeix, and E. Sadoulet, "The Welfare Effects of Stabilization Policies and Structural Adjustment Programs Analyzed in Computable General Equilibrium Framework," in Macroeconomic Policy Reform, Poverty, and Nutrition: Analytical Methodologies, ed. P. Pinstrup-Anderson, Cornell Food and Nutrition Policy Program, Monograph 3 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); F. Bourguignon, J. de Melo, and C. Morrison, "Poverty and Income Distribution during Adjustment: Issues and Evidence from the OECD Project," World Development 19 (November 1991): 1485-1508; and L. Taylor, ed., Socially Relevant Policy Analysis: Structural Computable General Equilibrium Models for the Developing World (Cambridge, Mass.: MIT Press, 1990).
14. J. de Melo and S. Robinson, "Trade Adjustment Policies and Income Distribution in Three Archetypal Developing Economies," Journal of Development Economics 10 (1982): 67-92; A. de Janvry, A. Fargeix, and E. Sadoulet, "The Welfare Effects of Stabilization Policies and Structural Adjustment Programs Analyzed in Computable General Equilibrium Framework," in Macroeconomic Policy Reform, Poverty, and Nutrition: Analytical Methodologies, ed. P. Pinstrup-Anderson, Cornell Food and Nutrition Policy Program, Monograph 3 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); F. Bourguignon, J. de Melo, and C. Morrison, "Poverty and Income Distribution during Adjustment: Issues and Evidence from the OECD Project," World Development 19 (November 1991): 1485-1508; and L. Taylor, ed., Socially Relevant Policy Analysis: Structural Computable General Equilibrium Models for the Developing World (Cambridge, Mass.: MIT Press, 1990).
15. R. Cooper, Exchange Rate Devaluation in Developing Countries, Princeton Essays on International Finance, no. 86 (Princeton, N.J.: Princeton University, 1971); and Edwards, "Are Devaluations Contractionary?"
16. R. Cooper, Exchange Rate Devaluation in Developing Countries, Princeton Essays on International Finance, no. 86 (Princeton, N.J.: Princeton University, 1971); and Edwards, "Are Devaluations Contractionary?"
17. P. Heller et al., Implications of Fund-Supported Adjustment Programs for Poverty: Experiences in Selected Countries, International Monetary Fund Occasional Paper no. 58 (Washington, D.C.: International Monetary Fund, 1988); C. Jabara, Economic Reform and Poverty in the Gambia: A Survey and Pre- and Post-ERP Experience, Cornell Food and Nutrition Policy Program, Monograph 8 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); P. Dorosh, R. Bernier, and A. Sarris, Macroeconomic Adjustment and the Poor: The Case of Madagascar, Cornell Food and Nutrition Policy Program, Monograph 9 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); and J. Behrman and A. Deolalikar, "The Poor and the Social Sectors during a Period of Macroeconomic Adjustment: Empirical Evidence for Jamaica," World Bank Economic Review 5 (May 1991): 291-313.
18. P. Heller et al., Implications of Fund-Supported Adjustment Programs for Poverty: Experiences in Selected Countries, International Monetary Fund Occasional Paper no. 58 (Washington, D.C.: International Monetary Fund, 1988); C. Jabara, Economic Reform and Poverty in the Gambia: A Survey and Pre- and Post-ERP Experience, Cornell Food and Nutrition Policy Program, Monograph 8 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); P. Dorosh, R. Bernier, and A. Sarris, Macroeconomic Adjustment and the Poor: The Case of Madagascar, Cornell Food and Nutrition Policy Program, Monograph 9 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); and J. Behrman and A. Deolalikar, "The Poor and the Social Sectors during a Period of Macroeconomic Adjustment: Empirical Evidence for Jamaica," World Bank Economic Review 5 (May 1991): 291-313.
19. P. Heller et al., Implications of Fund-Supported Adjustment Programs for Poverty: Experiences in Selected Countries, International Monetary Fund Occasional Paper no. 58 (Washington, D.C.: International Monetary Fund, 1988); C. Jabara, Economic Reform and Poverty in the Gambia: A Survey and Pre- and Post-ERP Experience, Cornell Food and Nutrition Policy Program, Monograph 8 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); P. Dorosh, R. Bernier, and A. Sarris, Macroeconomic Adjustment and the Poor: The Case of Madagascar, Cornell Food and Nutrition Policy Program, Monograph 9 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); and J. Behrman and A. Deolalikar, "The Poor and the Social Sectors during a Period of Macroeconomic Adjustment: Empirical Evidence for Jamaica," World Bank Economic Review 5 (May 1991): 291-313.
20. P. Heller et al., Implications of Fund-Supported Adjustment Programs for Poverty: Experiences in Selected Countries, International Monetary Fund Occasional Paper no. 58 (Washington, D.C.: International Monetary Fund, 1988); C. Jabara, Economic Reform and Poverty in the Gambia: A Survey and Pre- and Post-ERP Experience, Cornell Food and Nutrition Policy Program, Monograph 8 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); P. Dorosh, R. Bernier, and A. Sarris, Macroeconomic Adjustment and the Poor: The Case of Madagascar, Cornell Food and Nutrition Policy Program, Monograph 9 (Ithaca, N.Y.: Cornell Food and Nutrition Policy Program, 1990); and J. Behrman and A. Deolalikar, "The Poor and the Social Sectors during a Period of Macroeconomic Adjustment: Empirical Evidence for Jamaica," World Bank Economic Review 5 (May 1991): 291-313.
21. P. Glewwe and D. de Tray, "The Poor in Latin America during Adjustment: A Case Study of Peru," Economic Development and Cultural Change 40 (October 1989): 27-54, and "The Poor during Adjustment: A Case Study of Côte d'Ivoire," Living Standards Measurement Study, Working Paper no. 47 (World Bank, Washington, D.C., 1988).
22. P. Glewwe and D. de Tray, "The Poor in Latin America during Adjustment: A Case Study of Peru," Economic Development and Cultural Change 40 (October 1989): 27-54, and "The Poor during Adjustment: A Case Study of Côte d'Ivoire," Living Standards Measurement Study, Working Paper no. 47 (World Bank, Washington, D.C., 1988).
23. D. Sahn and A. Sarris, "Structural Adjustment and the Welfare of Rural Smallholders: A Comparative Analysis from Sub-Saharan Africa," World Bank Economic Review 5 (May 1991): 259-89.
24. Ibid., pp. 262-63.
25. V. Smith and J. Strauss, "Simulating the Rural Economy in a Subsistence Environment: Sierra Leone," in Agricultural Household Models: Extensions, Applications, and Policy, ed. I. Singh, L. Squire, and J. Strauss (Baltimore: Johns Hopkins University Press, 1986).
26. Ministère du Plan, Consommation et sources de revenu des ménages ruraux (Consumption and income sources of rural households), National Household Budget and Consumption Survey, vol. 3 (Kigali: Direction Générale de la Statistique, 1988), and Consommation et sources de revenu des ménages urbains (Consumption and income sources of urban households), National Household Budget and Consumption Survey, vol. U3 (Kigali: Direction Générale de la Statistique, 1991).
27. Ministère du Plan, Consommation et sources de revenu des ménages ruraux (Consumption and income sources of rural households), National Household Budget and Consumption Survey, vol. 3 (Kigali: Direction Générale de la Statistique, 1988), and Consommation et sources de revenu des ménages urbains (Consumption and income sources of urban households), National Household Budget and Consumption Survey, vol. U3 (Kigali: Direction Générale de la Statistique, 1991).
28. H. Barnum and L. Squire, "An Econometric Application of the Theory of the Farm Household," Journal of Development Economics 6 (1979): 79-102; and Singh, Squire, and Strauss, eds.
29. Beans and factory beer represent intermediate cases. Beans are traded informally with neighboring countries so prices are affected by the parallel market rate that is indirectly affected by an official devaluation. Factory beer is locally brewed but uses imported malt and other inputs. It is assumed that beans are 25% tradable and that factory beer is 50% tradable. Thus, the prices of these goods rise by a portion of the increase in tradable goods prices.
30. See Edwards, "Are Devaluations Contractionary?" (n. 2 above).
31. i is defined as the share of net income, the implicit assumption is that the change in prices for business expenses is proportional to the change in prices for output. This assumption is plausible for traders and most artisans. In the case of farmers, purchased inputs are only 9% of the value of gross output so that this assumption does not distort the results.
32. On the producer side, our approach is very similar to that of Sahn and Sarris (n. 8 above).
33. See Edwards, "Are Devaluations Contractionary?" Gylfason and Radetzki (n. 2 above) develop a macroeconomic model to examine devaluation in developing countries and set the parameters to simulate 12 countries, including Rwanda. Their model suggests that a 10% devaluation in Rwanda would result in a 2.9% fall in real wages, assuming constant nominal wages. Given that the 1990 devaluation was 40% and that nominal wages probably rose somewhat following the devaluation, these results are broadly consistent with the assumptions adopted in this study.
34. A. Deaton and J. Muellbauer, "An Almost Ideal Demand System," American Economic Review 70 (June 1980): 312-26; and F. Swamy and H. P. Binswanger, "Flexible Consumer Demand Systems and Linear Estimation: Food in India," American Journal of Agricultural Economics 65 (November 1983): 675-84.
35. A. Deaton and J. Muellbauer, "An Almost Ideal Demand System," American Economic Review 70 (June 1980): 312-26; and F. Swamy and H. P. Binswanger, "Flexible Consumer Demand Systems and Linear Estimation: Food in India," American Journal of Agricultural Economics 65 (November 1983): 675-84.
36. Adult equivalents are defined in terms of caloric requirements for each sex and age group, as determined by the World Health Organization. This is not an ideal method of converting household expenditure into a measure of standard of living, since it does not take into account the nonfood needs of different households. But given the large food share in Rwandan budgets (particularly in rural areas), the distortion is not likely to be large.
37. See A. Deaton, "Estimation of Own and Cross Price Elasticities from Household Survey Data," Journal of Econometrics 36 (September/October 1987): 7-30, for a discussion of problems related to the use of unit values (expenditure divided by quantity) in estimating price elasticities. Deaton points out that errors in measuring quantity may generate a negative relationship between the unit value and quantity, even in the absence of price response. In addition, unit values may be positively correlated with household expenditure because of quality effects. Using tests suggested by Deaton, these two problems were tested with the Rwandan ENBC data. Evidence of measurement error was found in only three of the 38 food equations, and no evidence of significant quality effects was found. This may be due to the importance of home production among Rwandan households; the value of nonmarket consumption was based on regional average unit values rather than single-household observations.
38. R. Frisch, "A Complete Scheme for Computing All Direct and Cross Demand Elasticities in a Model of Many Sectors," Econometrica 27 (April 1959): 177-96; and D. Newberry, "Identifying Desirable Directions of Agricultural Price Reform in Korea," in The Theory of Taxation for Developing Countries, ed. D. Newberry and N. Stern (New York: Oxford University Press, 1987).
39. R. Frisch, "A Complete Scheme for Computing All Direct and Cross Demand Elasticities in a Model of Many Sectors," Econometrica 27 (April 1959): 177-96; and D. Newberry, "Identifying Desirable Directions of Agricultural Price Reform in Korea," in The Theory of Taxation for Developing Countries, ed. D. Newberry and N. Stern (New York: Oxford University Press, 1987).
40. See A. Deaton and J. Muellbauer, Economics and Consumer Behavior (Cambridge: Cambridge University Press, 1980), pp. 187-88. Alfred Marshall recognized that consumer surplus is only valid under the assumption of constant marginal utility of money. Another implication of this defect is that consumer surplus is not well defined in that, for multiple price changes, it is path dependent. In other words, the value of consumer surplus varies depending on the order in which the price changes are introduced into the calculations. This problem was identified by P. Samuelson, "Constancy of the Marginal Utility of Money," in Studies in Mathematical Economics and Econometrics, ed. O. Lange et al. (Chicago: University of Chicago Press, 1942). The EV and CV, by contrast, are not path dependent under consistent preferences. Various methods for measuring EV and CV from ordinary demand functions have been developed. See N. Minot, "Using Exact Welfare Measures in Applied Studies: Does It Make a Difference?" (paper presented at the American Agricultural Economics Association meetings, Indianapolis, August 1995), for a review of several approaches for measuring CV and EV.
41. See A. Deaton and J. Muellbauer, Economics and Consumer Behavior (Cambridge: Cambridge University Press, 1980), pp. 187-88. Alfred Marshall recognized that consumer surplus is only valid under the assumption of constant marginal utility of money. Another implication of this defect is that consumer surplus is not well defined in that, for multiple price changes, it is path dependent. In other words, the value of consumer surplus varies depending on the order in which the price changes are introduced into the calculations. This problem was identified by P. Samuelson, "Constancy of the Marginal Utility of Money," in Studies in Mathematical Economics and Econometrics, ed. O. Lange et al. (Chicago: University of Chicago Press, 1942). The EV and CV, by contrast, are not path dependent under consistent preferences. Various methods for measuring EV and CV from ordinary demand functions have been developed. See N. Minot, "Using Exact Welfare Measures in Applied Studies: Does It Make a Difference?" (paper presented at the American Agricultural Economics Association meetings, Indianapolis, August 1995), for a review of several approaches for measuring CV and EV.
42. See A. Deaton and J. Muellbauer, Economics and Consumer Behavior (Cambridge: Cambridge University Press, 1980), pp. 187-88. Alfred Marshall recognized that consumer surplus is only valid under the assumption of constant marginal utility of money. Another implication of this defect is that consumer surplus is not well defined in that, for multiple price changes, it is path dependent. In other words, the value of consumer surplus varies depending on the order in which the price changes are introduced into the calculations. This problem was identified by P. Samuelson, "Constancy of the Marginal Utility of Money," in Studies in Mathematical Economics and Econometrics, ed. O. Lange et al. (Chicago: University of Chicago Press, 1942). The EV and CV, by contrast, are not path dependent under consistent preferences. Various methods for measuring EV and CV from ordinary demand functions have been developed. See N. Minot, "Using Exact Welfare Measures in Applied Studies: Does It Make a Difference?" (paper presented at the American Agricultural Economics Association meetings, Indianapolis, August 1995), for a review of several approaches for measuring CV and EV.
43. Y. Vartia, "Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Ordinary Demand Functions," Econometrica 51 (January 1983): 79-98.
44. 2 and Consistent Measures of Explained Variation," American Journal of Agricultural Economics 77 (May 1995): 319-28.
45. 2 and Consistent Measures of Explained Variation," American Journal of Agricultural Economics 77 (May 1995): 319-28.
46. One might expect rice, bread, and white potatoes to be staple foods with low income elasticities. In Rwanda, however, these commodities are two to four times as costly (on a caloric basis) as sweet potatoes and cassava.
47. H. Bouis, "The Effect of Income on Demand for Food in Poor Countries: Are Our Food Consumption Databases Giving Us Reliable Estimates?" Journal of Development Economics 44 (June 1994): 199-266, argues that the income elasticities of staple foods are systematically overestimated because of measurement error and insufficient correction for guests and hired workers eating with the household. He considers staple-food income elasticities above 0.30 implausible because they imply a caloric income elasticity of 0.35-0.40, which is unlikely given the small differences in weight and metabolic needs of rich and poor households. Methodologically, there would seem to be little grounds for concern, since the ENBC data were processed with careful correction for guests and meals taken outside the home. Furthermore, much of the food consumption in rural areas is in the form of home production, measured using a food consumption recall questionnaire, which Bouis argues is more accurate. Nonetheless, the estimated caloric income elasticity in the rural sample of the ENBC is 0.42, in the range Bouis considers unlikely.
48. Deaton and Muellbauer, in Economics and Consumer Behavior, discuss the "approximate proportionality of expenditure and price elasticities, which tends to be quite accurate even for eight or ten commodities" (p. 139).
49. Few studies have examined the distributional impact of postponing devaluation. One such study is P. Glewwe and G. Hall, "Poverty, Inequality, and Living Standards during Unorthodox Adjustment: The Case of Peru, 1985-90," Economic Development and Cultural Change 42 (July 1994): 689-718. Glewwe and Hall find a sharp deterioration in living standards in Lima during a period when standard macroeconornic adjustment policies were avoided in favor of policies to stimulate demand.
50. J. van der Gaag and M. Lee, Household Consumption and the Distribution of Welfare in the Ivory Coast, Living Standards Measurement Study (Washington, D.C.: World Bank, 1986); P. Hazell and A. Roell, "Rural Growth Linkages: Household Expenditure Patterns in Malaysia and Nigeria," Report no. 41 (International Food Policy Research Institute, Washington, D.C., 1984); and R. King and D. Byerlee, "Income Distribution, Consumption Patterns, and Consumption Linkages in Rural Sierra Leone," African Rural Economy, Paper no. 16 (Michigan State University, East Lansing, 1987).
51. J. van der Gaag and M. Lee, Household Consumption and the Distribution of Welfare in the Ivory Coast, Living Standards Measurement Study (Washington, D.C.: World Bank, 1986); P. Hazell and A. Roell, "Rural Growth Linkages: Household Expenditure Patterns in Malaysia and Nigeria," Report no. 41 (International Food Policy Research Institute, Washington, D.C., 1984); and R. King and D. Byerlee, "Income Distribution, Consumption Patterns, and Consumption Linkages in Rural Sierra Leone," African Rural Economy, Paper no. 16 (Michigan State University, East Lansing, 1987).
52. J. van der Gaag and M. Lee, Household Consumption and the Distribution of Welfare in the Ivory Coast, Living Standards Measurement Study (Washington, D.C.: World Bank, 1986); P. Hazell and A. Roell, "Rural Growth Linkages: Household Expenditure Patterns in Malaysia and Nigeria," Report no. 41 (International Food Policy Research Institute, Washington, D.C., 1984); and R. King and D. Byerlee, "Income Distribution, Consumption Patterns, and Consumption Linkages in Rural Sierra Leone," African Rural Economy, Paper no. 16 (Michigan State University, East Lansing, 1987).