MA CROECONOMIC , STAB fLlZA TION AND/OR STRUCTURA L ADJUSTMENT POLICIES AND POVERTY

A NNEX

MA CROECONOMIC , STAB fLlZA TION AND/OR STRUCTURA L ADJUSTMENT POLICIES AND POVERTY

A.> .t.tPdinli,,1wetlOnof1M document.lhere ;•• I"l('Pdto ,peafylin'nde' ofpo.eft~,fweinlPf'odto"'.~e

• qu.ant ita tIW.""Iy<i. cj, .... impact of mac'o-e<;onomi(.Jl. bOliulionlind/ or "fuelUl.l j;ljj\4If'l'lffi1

fdo:Je.

^onpowoly

Such irod... has to be conveni""l .nd useful. not on/y in .n ~..lional conle.\' but Nos to N~ .ppr~~te

norr,,,tivepi'ope1'tIIM. The typeofpolicin""""tioMd.boYe,are di'Pctfll t""". rds broad seecesofI~ KO/lOmy. UrId...wdl«onomK policyfr. mework.. ..dr.r~tionwill1. - thtotfMled....:1Ot .g.,,"'I I'"nor>-t.Ml'Od_ ; .

~formof 'M '\lncull",.1pAce _ y 1.110< r....,1prodoxe<s 109""" citymm.u....rs aM tr. de ,..formwiI f... 1M e.1lO'tSKIOl'..cj.ins11Mimportcompel in')W'ctor. ApcM'rtyi~x;'' ....'ef"'.. I"l('~ thiltCiOnbe detompm.oble ..crou...ctor. and can ....ity uplufe >K!.o'alshill> .nd .'X!' et!.le themintothe imp;><t ono....,ajlpoverty,

" Pc'ttny lOOn Ant~l imiljgo

Already in19M. Mlle' . Gt~,..nd Jho'bed:eIuodS!J99"1..:l.nIndoo. which^COW'n rnanyof 1M propeo1J!n indo tP!lolIb<M, tl'tUS_pr~1.._simi~tindu . "i""""eisdeflotl!'dbyYo,"'"trO'QUf'IIC:YofdPn"ty01iro«>rnJe

ftlJ

lInd.~

pov<'f1y"

by

r.

~n !tie powrtyi~.could be'express.<!is '0110""',

wher~ b · $ . y.

h ' •

p."

(-l"k ldy;n D

o ,

1"

IntactwhAlwe hive~r.is" t" rNIy ol ...,.ce. IIo1r"."..lnUd by/l Es...nto"olythe ""'" t... It>. ·pow'lyglOp·

(b' 10' u chpool porrson_~ " " l<:loon ofee poverty ~ne (!.:l)

,

..',.., tM inc _9~P'.1., 10 . _{~' <i} 10 ,.I-,,:t·pollf,ty

,,-e'r.oon:

~nd ,umS 0' .' tt>.pool unit<. fo' G• 0it " e~ ,yto ,ee Ih~t Ih. me~ ,,,,e (OII~~, 10

'"

whe,. Rr.)isth. cumuldt..e d"tnbolon_cor,~ to.-(.J..,.;.... . ReI)is simplyt~

"".;ld

^{counl'. 1'0: t~}

f'"et"'"of un,"b!olow lroe POW'lY~

')om@'.t<JllloIs ha•• <riticiZ«l tt>.head ~OUnl ,,,t>ofor not 1101\'1"9.!Ientio n "I "II to IIowpool "r~ -only 10 tilei,tot al rwmlw, ' , Unle" lho' "t~l;.ninlOit<;~O\Inl by...n,"IIa • I.thi, <ouldIw p. ,ticul. rly impo,tant int~

contut01macr(H'~onomicand,tru(lu, ~1 ~djull menl.alupenditure,I!'dUCIIQnpoIicif-$ for e...m~"'. "HKIboth Ihe number< 01Ihe pooraml lheeXlenl to which theyf.1I be'lowthepove,ty Une

h ' •

p, . .

^(-

^,

^jh)dy_AB

_'"

B.~

.-, ,

.. lhe ,"~ome9~P r~I>O ~I t~ ".'~g e poo, person', i",ome Y, .

P, " somellme, ,e'er,e<! to ., _th~·pe,

" p".

^"99'e 9" e gop" Infan byclloo>inghighe,

.-.1..,.,

^of

^a.

^we~ould

gene,ate evenmor. IMSlto.." ytow ordl i",o m. , ofIr.. poo,e,t 01 tile poor

' A I:,Sen. Povert y~odfam,or AAe$WY00 Ent,t'emfnl and Dcp" YAliOr Oxlord Un..e,sily"' es , 1981.

fOODAND AGRICUlTUR! IN "'RICA· !CAj FAOAg'icullure Divi>ion .Stall PapersNo 1

es

Apa t romItsfl xibirtyan j norma pope res,til p.c ssofindices as on 0 e e m im ture -itissu roupdecompo be. I theov r \I pop latio w r o bedivide into n mutually xd i h ustiv goup • indexedi - 1.2•...•0.andif 4. w r the velu of th poverty sur ingroup

t;

^{th n}

(4)

e x,is

JI

Popo ionof po a'onto b oundin group l, , 1

-. 1

( ) p s r asing

a .2•...•nis ul uallyexd usi oft

from t sourc for th sam in

r"i

I;and:

bivariat d nsity0 Y, andy, i t epopul ion.cis h co ditio I nsity ofY1' T densiyof is:

r(y)

r

^{C(Y-Y2 ~p(j.~ 2}

ere ^I

wherej i t the margin I

In(4),w ssurne h caseswh r policyafeels

e<o'elopingcountries'0 gener I nd canco ondi n 0 so ces ich esigni.

ogo s b-qou d compo i 0 and c

x becorn

her

(6)

'"

it,....poWrtyi~. '01 l~whoH':IOUfce 2income

is J ..

ASWI' WI" ...litt'f.WI'un. pptytil" _~ byincome~ 10 the ,\1\I!ysisof po¥erTywilh ~lP"nditure .wi1chr'l9",,,,)$Urn

2 E!orndjlYfCRed uctio n ,00 Poyfl1y

h peonditure,f'ductiol,shouldtot'lfget.clpe~ ~1m!lhow belowIIw poverty~"rIOinso.Ulf'<!.~not,

f p'09,,,mmeofaw~I"~m.ndcont . Ktiorl...i~bl)Iincrn ,..~_ '1Mq...lIonroo byhow mud! 1 T....

i_'

^{ofCOU'~Mpendson " MtailO<l}spKili,.tion01eKll item of ...po!'tIdOlu'.rfllvct ion'ndonhownelliteom fH<kinto the ;r>come1ofthe poor. Uotil

now.

roo," e",pI 10.""IyletI>ne eneeshas 9O"f ~ndthPotMous l1ile~nl lhat.^is

k>rocJ

isthepoor be••

mor. ol

lilt burden,powrtywiN

;nc,uw

bymore, Ho_ ~r,^Wfu n d..,iw somebenchmarkq""nl;l iClltion.ollne_~k..1yimpact Onpoverty.prOV!de'd. """a" ..ptlIy1il O'd ,epresent " ''''''' of now an KOnOmy~ progr,,.,meof ..~"chlu'"I~ion f..ees through to indMd",,1incOfM'

'liftI,IlO c~ twowell stylizNl 'PpFI'\f'f'Il'llons: Ttlii'~m isthaIewtyitlc:_ is,,",,-,,O<lby'0 amount ..

(the'idditrw"....00.1)while t....

,..:onc!

isth at ""'e!')'iocomeis.!'d1U<! by"1.001I (I.... 'mullipli(.lliw" ~)_

" . ..

The marginal,..pon...01 poverty10 . cha "ge"ioe or

t '\

0..." by Jf'.{~) .~p ,_,

tk ~ •.,

r e

1"

(10)

(11)

Uw'9

t~ factthaI p.., >p. i! loI~lllal(11)OSpo5Itrw.as is(10). Co~1'\I1ye.pend't IUreduc tion

intf.~ ~rty. Ths isIlO1 surprisi~. butwhat (lOjand(11)

grw

U5 are ~lic"",1ysimple e.prnsions01tr.e ...6<1 resJlOO't' ol po_ly. and tM'" can

ee

cak ulatedfrom income d,sl"b\J,1O/l da'a ll(IUllllyavail~b1.

in

many African countries .

let U5 tryto de...p tilt' .""fyiisII Iollle furl~r by ll<sum,...., II uS<' whe'e ...penditure os req",,~ 10 ee rt'dKed bykll.wilereIIos ee Nl ~I...~n,nco_ ~nd I:os1Me>pendrtu'..'..., ....t>anparam,,'t'f. Tt>en.tor,he two modelsof how

th"

^{muro changefe~l lhr0\l9h} '0 1".. microlevel.we Ilave

" • 1:..

FOODANO AGRICULTUR E INAfRICA·ECA/FAOAgrKu1ture o;vision . Staff hllt'r\ ""'.1

(l:l) (13)

(14)

ss

7) (16) (15)

~9 t

ap ^I' dP (e)

- -Po(~)=

-elk .

_ 0_ _._

dJ:

d

of

( ef ide n easur lst

roxima

a '

an

in ( ) 0 _

Aslourrlea = 1i. ,t

opo e dit ere uc: io e of t or er of 15 ⁰ l.e.Q' • 0.15.

Th nif

-

^u_s

.

(I, ,t

9 ^{t 01}

Y0.24 \lhic

pove tylin isaro nd 1/4 0 9 P

9

o ) ,

"IIch nog

Tofi d rc c ange'n ^I (e) wh t w needis dP_{1{ )}

P₁(.e) d P oS

(tS)

it 1 1

- ,- 4.-=8 s

2

so

pe ur

, • 0.15.

P t cent t

i, " P, (.) wi! inc:r ase by ~"-Ji:E.!-!a.!&l..u ^W en an

For '" 1,

dP

d -- [A-PI 1-8

-A [

-

^{( 9)}

• 00 t int p rc mag c n in

P"

im Iy ^ivid by

P,

to^glV

I 0 ," ) A

" tI )- ,, - -

(1_I )' ,(l -BI

o _ '_ll.:.!l

(20)

1-, •

• " ,tI ) _~,, '.t .

^IfB is 1/2. IMn

' ,fI)

B

".incru sein

P,_

, _• - .

ThiJshov<ltNI N:lotMr~in_irlc~incruse ~by"'<IChmore IMnmuI~I"'"reductions inil'l<:Ol'M. InttwmuitillliatiYec.lletherichbwmud!

mo<.

~thepoorlowmuchIMs in

.bsolut.

I""ms (101' a

po

total.oed\lction-.quifl!fTlPOt)..nd.si~...intern ledOn ablolutepcM!'fty. the rnult fllll<>w\, Inatly use.

I... Ibc>ve di",,,,,,;,,,, tells us Ih..t ...!.

..

and l

.

-B a,. I ... "wnsilM\)' ,"""fli"",nt, "neO<lN to trln,llle micro ,xpoondit_ reduo;t""",into microIX>""'"Yinuu se. -the for...lorlhe additiveu ...I...!.In..forthtmult,pIoo;atr...

ca ...

n.e...

can be cakul.>ted rea lOni bly.a1ilyftom I"'"SOt{ 01houseI>oId1UtW'\l'datalhil a ..cur..ntly a . . .bIe in many Altiocan (OUfIlrie.s.

Intl>f>d\ocjng lheaM~oJtI1ismodoo!l.(a) alti'lougtlwehave10CU1edon" • I.~st>ouOdbu1eattN' highe,

••Iue. of/I u nbe .tIoIlyzfll~UolIIyusily.•Ithough eedata requiremenl.wouldbemoxnmore"'....; (b)while the nyhled ·addlt'...•.nd 'mullipjiu live' rtj)r~nl. lions 01•..,.,ndllure ..dyctio n a .. Y",fuJ and IMIylicaIIy convenienl. lhey are.1sodo$eawoKlmal""", totheeffectsof.dual policies, Fore..mp1e.cornidof.cylinfood ...body ..pendllU'e which is commonin most stabihz.rrt>on

.rodfOl'

$II"'I", at

..:Ii"'I""'nt

pacUgn. _ lhe food 'lUbodyisgiven

bv •••

tionedamounlof foodsoldthroug hgovemment r. lion~

.1

^{belowm.rtetpricestoill}

I'>oull'IloIds(social"lAlriuncountries), .ndlhe••bonu nell~l)obe.noIdonthtopenm.rk~.then lhe eflK'I o'lhesubsidyis10 ina...~hotMhold'sincomebythe..me, Idditiw, lmount

Heoc:. ,.

^islhe lllbsidyI,mes lhe .I boned q....n1l1y.•ndwhelMrthe sub1i<tyor lhe q""nlilyi, Clf!. lhe .fflO<t on PO"'\)'i. Ih,oY9h lhe change int On llIeotr..,. hind. let .m""e Ihll Ih. subsidyi. '" lhe nalur. of I neg.l",- indi,~la' i.•. the suMidyis

9iY""

on~ry...ilCClIIlUIf>ed. nd noljuslonlherallQOf!d quantily. The n InthisCol.... .cUI,nthesubsidy ••Iewi~

allP"OlIirn&lel)ocutincom.inproportion10q....nt'ly consumed ~r.ilq""nblyCOfI1UmedisitwII inproPOrtion 10income.thMweI'eHsentia lyint,,", muItipIic.olive,~tr..-.sf...

use' .

1\isquOle dur~twn.1hok!l lor "" ucl'Oll,nnauo...1absotpbon holds, ....lh oppQ$ile "'In. roo '.-.cr ....' in nolionali",of\'\f! . Wlwt _ have he".I,,",'efor•. is. ""'tl>o<lof

.s..

ssir>g MW'1rKlie down' will"H"" t POve' ty inlhelongruo. Suppose.IOf ... mple-. l!'lal them<IC":KI"bi~l<Il ion, wr>ich reduc.s Iblorplronal a,I,o'eby1Spe, tent incr... lhe ...1growth •• te by2 pertenUge poOntl. 1/,he growthtricklesdoY.n10 tne ml</Olevelin multiplicativemlmer,thMformulIipIicalNt ""'"ofe"PPfl'*l... .edo.cI_ ~~t.h approl<itnilel)o7.S-,e.,slor 1Mpoor10_~nlheg.oundI"'"low. IItheellpt<ldrtur.,ect.JclionisadditNotin...1_ .1\woui<Iu k, """" long""

(9"'"" Irwnurnt>e<s _ tw.~\IM'dwlore), SYCIl_~ ol...gnotuOt<t>rl<lil U1' ''nough rel1On'O~onten",,,on ," rpt lirlQthe <\lISto ln.t,he poorare prOltct'&,

'Thttnpao OlSl.W,UligO .,4(0'StructuralMi~tmrnl Prog,ammuonlhe BUll!Xal11ofAl" '''nCpY!1"'~

up <om'''9nud;'bytheIoonlECA/fAOAg,lc.u~ure0.", , ;" 1\{May1'.188) n", study ana..,...d~le-renla.po~n01 food .uMidiM and l~poor",gmenl ofthe populenon.

ITh. WorldIIdnkisllckling these illU" within the f'ame"",.k,01 lheirStrutlurllAdjuSI"",nl p,og ram mes ILO.

\IN[ SCOaodFAa a"worlung inI.... ... m, d"O'(1ioo Let u, hopo10. belt.. ,coord,nation;n

It "'"

d,U",nlu..lui elforts

FOOOANDAGRIC ULTUREI~ AfRICA ·rCA/f AO Ag,icullure C.";.ion_Slafl rapo" No 1

3.

Lc us consid r simpl to scalepod ion func ion

ssurnpi n: twosec tor modelsof h mployingtwo factors:

Rj(K₁,D).Rz(G.D~

cono y.tw o oods, . constan r turns (21)

The pric softh twogoodsareP, n Pl andt , urnsto h o c01Sa" a_J ndS" S2• of e

sectors. In e shor a m diumrun,wh r actors , immobile acrossthesectors,factor returns r givenby

•

a'R

.:l 2a

'n

²-~

(12)

efirst ssump·o isth t thepopul tionisdivid into four mutuallyexclusiv nd xhausiv gro upscompo d

of uni hich9 t irincomesolely

r r

a facto in part icular s ctor. Thetot Iincomes

o r

ch0 thesefour

groups r

(23)

1 percentch nge in :l n a_2, and h t

tha individu Ii comesinth fou groups ,.a'l sJor a_J• illI d o l 0/0 ndo men'S 10 rcaseIet r ,

't is silyseen 1%ch n9 inP,willc.au

a %c a 9 inPJ illcause a 1%c ang i ²a OJ. we supoos

differ b c u of a )( distrib utio of tactor endo rus,a 1

c anqein individualincomes. Thusi w dena eindividu Iir com s a

(24)

and povrt ineachof h foursecto rs can bewrit e Pl,~:

f;<

s-

_l)ar

^(Ylt)

(25)

Assuming he proport io of pop tio n ineach0 fourgrou S

Furt rmor. a • measure a 0 ra pov t yis

68 FOODAND AGRICULTUREINAFRICA· ECA/ ADAgri ultu r Oi ision·"St ff Papers o. 1

(26)

Now, w~can '11t1SIh~ 10t.1euectsonpo't1'l1~ oj.nincl... inIh<-p'ic~of 900d Ia...t a <!l'a . a<eion II><'

~Ctofgood l ~np. "'""')', bya facto<01 p'opo,\io nahlyI" '"do

' o,

^{.nd Yo, Wt>on}P,""a"9""by

• faclor 0' p'OI'O,'io n.lfllYX.. so dO

' t,

and '.. . Consequently,

"

~_dg, ,_I,..

• ''' 1 1', -1', )

..~, ~ ^~

"

^{rig, I}

I ... ... '

^II'

,. , .

^_I'

'" ^I

"

~

rig , ....

, --a(P,,-

-""

^-1'..

-.. 1

L~1u, m.~ea

'n"'....

bl~alsumplion, "ame~ thatnoOW""" Iofc. p,t.1.'~bl'low lhe' po","y"'" Inot<1~

,~ctor. lht n• policyc","ngt N wtuch ioclu ,"" 1',and <!ter.. a"", 1', "adl lo

dp,._.,." ^{_ , ,} ) <1'&, _ .I,"

^I"..

-r _{I ~l}

(28)

<IN .., d!I ... "'dN

., " • 1 and

4 , ._

dg,

w~

^ol:ll"n

ON ON

(29)

Eq...,ion(29) 9;'"• P'l'CR_modfor ~1""(m.,qiMltrllKlof ''''''"1...pric..c.h'09"in1"" shorl 10""""'m run, w'-tfOodor mobhly aaouR'<1<>nislow. 11."0showsthat,hot info,m.tion.t'q"" Wil lhe "".d count'I1io. ndincomeg.p '1100inIKhofthe two populatiOllg'oups InI.ct.giventN auumption~Ino 0'"

itllhe

k,

ItId k, groups isbl'low lhe PO't1"ly~"'" wl ....yrIf'f'd 10~""'"C~ C.at>d "'" SKI",.I " 'tr-ibutionl01 incQfM10.110 I""«>nstJuctiotlof "'...A~,.II... .and I~ . Thisshould bepossil*"';09 e';<li"9hou....1'>olditlcomt .nd Ilrpetldit 1 ~ inmanyAf,ian Coutllr.es

Thesecond I'lUmpl,on'elale, 10Ihe ",edium10 Ioncj le'm I<t na,Oo""'t ,..factor, mo...sc asto eqUi Iil~

lactor IttU' M. TMn ... know Iha l (22t1'Ia,10 be ,epl""K1 by

(30) .nd

V ,.

D_J•

X"

X, btco metnd0g er'lOUl,Iubj""t10t....o_ all<OMl, .i" t

D, +D, ·O (31)

X,+K, "X (n)

whe,t

K

and

V

Ill' ecor>om~ WtOPdisponlbiji"..,oflhe tWOfac:to<s B~ "';fIgl:ht _Stol~I·Sam~llOtl lhto,~m. w~

know lhat

f090 A~ AGRICULTURE INAf~1CA -EC~AO AqIKullu't O'vi"""·St. ff P.pe" No. I

ss

(33)

L = _

a'p

ts ep's ow 0 oceed om hisb sicresul in rade th ory to quan ificationof the effects on hereb • f ct or.nputj' r unit 0

increase P, illca se or no•the r t ns 0 hef Samuelsonth orem,whi h incomedi ribution.

po r .

Kee in heassumptiont atno own rs of ca italar . poverty,a dfocuin 0 r 'ngs of I bot, ii h (3 )

a chang e in ya _Je,v~

net

^L_-z a sobya c or

Hthedisribution0 acor ndowm enswithint e d]andd

e c

^{ors emal} un<:h oged h n, 5 efor , wen rite:

-dP4_.., =-Q[P~ P~ )

d ^{6.. · ·1 . '" (35)}

dPd,.,.

- I

"'-al P -P )

'~-lI ^.1 ~ ( 6)

ct tion is Cor 2

W can now writ th 0 erall ff c onpo erty of policychang dP

.1

_'

- -

dP_dd,

--

d_dN... ^{.r - - - -}dP~..

ss;

^{Ptl -dC3}

d dg dN '" dN

asfoil

d ⁴

PJ~^{..dN ( 7)}

- ddN

"' Ie

:fl

IP

d,.._l

-r

d..

1

C

,.a

[P

:l -, -

Plia. ^{( )}

euse t am gap ratio '

de) - -d ,_For a = 1, o t e s

xtrainfor io neededisth Mea countr tio nd

39)

0)

1MrI ill'lOdooJ.bltfoalIM '~....

lJ1is

is.ppIic.1W\o.~ rel.li...poricechar>g~.incJYd,ng^ilCh'I\9'

'n

the

r~ti.... P"'c~of Iradofod and non-If~llOOjl. ... ~,""'t_.

_ .

^{J1 5ho<lld N ....led tIwol} ,"" _toI, 1 dMsion be1_ lItded lNJ _ ;>dHI1l..-dJ iI "'" ".<o=.~...tlKted" !he 5«10111d, " _ ...ai~ in

houoenold _ _ ,nd.~.... ~

n. . _ ."" tyvl.

^IIto.wd

^on

^{f t}

^as...

^{pbOtl 01}...c...>duWity01incOlTW

sou"",, · no

1I'd<~

y"'tl\&,

_ " 011'

^lnOfi

I""" _ _

ceo ~•...me

"I nc.n coum'" ...,

^{~. whe'i ttvl; ••}sumpt>on is

NppooprY,e

and

r-o.

10t.~O'd

CorMlIor• f . . -

JWOCl\ltitI9 ..

^pPOItcrop

n

. 1ocII,IoldtDo:l6crop. SMtng ,,,. ,.,.""of ,, _N _ IJdd MIl _ .odtd

<JDQi1j. ....

aflKt both _ _ fat tN ,_ . Tho-_ loon is _ . ItIIS

- thcdoIo9t

couldbto~ ^{to IUd'!}

uws

, -,,', .

...J, ....,1 ,. '

^{i l _ sfromlhetwo}to.nft,!heftit itlowIcl...~wfr~thiM . .

!'*tPr'

IJ~

from$CUe, Ito~2....~ ,HKlIhe_ dl\tnbutIonI' II, If _ ..eco"side••og ..^blllncl!'d~I'"

~Iinojof food~from _ t,tJonI'dcommodity

10"""'" .,lCInI<I

^{~.tNI'ffft;t0'1~....}

be lI'fO, lie ' ' ' ',' , .• ••

!iYt

tr~ from IOI.«Jt I to - . 2.".;1 itodH<t1ft«! _ _<:h~IO'd

~.andII " Ilwl

e." _ ...

toolonoj ""boolcM

tee""~letrw _ In 01"",""cO" I""'",.,.

bJ . , _

^{byM, l"':} mun of "'''''i l" " _ ~eMtl -"Ci I l/lCClme

d«ru_

by.

"cto' ,

,ndeac h """'.01 '11(0_,1'I(' U Sf'lby. fKtOl

v .

T"""

, ..(I •I)l , • (l + _~JJ,

( " 'I

" .

."

-" .

^(Il)

p.'

f.' :If(

!:lr C(Y-(l',o,to,)'l

W

o

0 J , _,

"'. 1 - .

- - (- )I'

'" 1 - , •

.-(1.,..

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7 FOO

Dans le document Food and agriculture in Africa : ECA/FAO Agriculture Division (Page 66-75)