Improvements in education, health and nutrition are important for intrinsic reasons as source of pleasure to individuals – as well as instrumental ones due to potential effects on future labor productivity and earnings. These are among the best indicators of well‐being, reflecting quite directly on individuals’ living conditions and capabilities.
Hence development economists’ longstanding interest in tracking changes in educational attainment, health and nutritional status and in incorporating these in multidimensional poverty measures, as exemplified by Duclos et al. (2006; chapter 4). A longstanding empirical issue of broad interest to development economists is how changes in income or expenditures affect food consumption patterns, human nutrition, and, derivatively, human health and well being. A central debate revolves around Engel curves, which describe the expansion path for goods with respect to income. If Engel curves for nutrients and health are reasonably “steep”, meaning that food consumption, nutrient intake, and human health respond reasonably strongly to increases in income – at least among vulnerable subpopulations, if not among the population as a whole – then income growth can broadly achieve non‐welfarist goals of improved human nutrition and health. By contrast, if food consumption, nutrient intake, and human health respond weakly or not at all to income, then growth‐based development strategies are unlikely to be especially effective in advancing nutritional and health objectives. Structural interventions (e.g., clean water, solid waste disposal, primary health care, education, credit, market access infrastructure) may then be more effective interventions if one wishes to improve the physical well being of poor persons.
Engel’s Law posits that food is a normal good, but a necessity, i.e., food has an income or expenditure elasticity of demand between zero and one. The poor spend a much larger share of their income on food than do wealthier persons. This basic fact suggests that income elasticities of demand are low. But the drop in budget shares appears relatively nonlinear in the data (Subramanian and Deaton 1996; . That is probably good news, in that if we hope that income growth will contribute significantly to the reduction of hunger, food insecurity and poor health among the poor, then we would hope that the marginal propensity to consume food – and more specifically, nutrients – out of income is reasonably high among the poor. Published income elasticities for food/nutrients range essentially from zero to one. There is a longstanding assumption – with reasonable empirical support – that the elasticity falls with income or wealth, but that the elasticity is sufficiently high so as to make income growth a sufficient condition for improved nutrition. Over the past twenty years, however, the income‐nutrition relation has been subject to heated reevaluation as several studies have found much lower income elasticities of nutrient intake than did earlier research. Behrman and Deolalikar (1987; chapter 22) and Bouis and Haddad (1992) are oft‐cited examples of studies that find income elasticities strikingly close to or statistically insignificantly different from zero. Others, such as Subramanian and Deaton (1996; chapter 23) find higher income elasticities, especially among the poor.
The finding of a low income elasticity of food consumption or nutrient intake sends the message to policymakers with non‐welfarist objectives that income growth is a poor means of improving nutrition and health. The provision of basic needs then seems to hold more appeal than does stimulus of income growth. Even more fundamentally, if the strength of the relationship between income growth and other indicators of well‐being (e.g., nutritional status) is weak, that calls into question the appropriateness of income and wealth metrics of development, on which the economics discipline leans heavily. So this is not just an arcane debate about a single point estimate (or series of point estimates). Rather, the literature on the relation between income or expenditure and food consumption and nutrition is fundamental to development economics, as metaphor as much as for the topic of food consumption itself.
Since human health and nutrition are inherently dynamic, it makes sense to try to explore the dynamics of food consumption’s relationship to health and income. In the standard life cycle model, with the subjective discount rate equal to the prevailing interest rate, consumption each period simply equals permanent income.
Then the permanent income hypothesis fails. Health irreversibilities create an incentive to shift income towards current consumption so as to increase the probability of avoiding thresholds below which permanent impairment becomes likely, while liquidity constraints may cause households to experience unwanted volatility in consumption if income is stochastic or deterministically fluctuating (i.e., varies with certainty across time, perhaps due to the seasonality of agricultural production). Add to this the fact that the marginal physical productivity of nutrient intake may not be equal across time – due to seasonality in work effort or disease incidence – and we have yet more reason to doubt the intertemporal constancy of food consumption behavior.
Behrman et al. (1997; chapter 24) explore the dynamics of the nutrient intake‐income relation using panel data on Pakistani farm households. They find that the income elasticity of calorie availability depends importantly on the timing and anticipation of income. During the planting period, food prices and interest rates are high, making calories expensive; moreover, calorie intake also affects farm profitability because pre‐ harvest labor productivity is not directly observable and thus is subject to moral hazard. For these reasons, income earned during the lean season can have a relatively strong effect on calorie consumption. By contrast, harvest‐stage income has at best a small effect on consumption when food is relatively plentiful and labor market imperfections are absent because productivity is directly observable.
These findings are consistent with the belief that nutrient intake affects health status and therefore labor productivity and income, as well as with the related belief that such effects are not uniform across seasons, years or households, thus both cross‐sectional and periodic intra‐ and inter‐ annual variation are to be expected. The Behrman et al. paper underscores that interventions’ impacts may depend on their timing: for example, providing income support in lean periods in order to improve child health and nutrition if the income elasticity of nutrient availability is highest at that time. There is a second dimension in which human capital reflected in education, health and nutrition has long interested development economists. Because individuals’ labor power – both physical and creative – is a key productive asset in all economies, and often the primary or only productive asset held by the poorest members in a society, the study of human capital accumulation also becomes central for instrumental reasons, due to the role it plays in explaining poverty and growth patterns. Endogenous growth theory (e.g., Lucas 1993; chapter 48; Ljungqvist 1993) and modern models of poverty traps (e.g., Banerjee and Newman 1993, chapter 6; Dasgupta 1997, chapter 7) especially emphasize the central role of human capital formation in giving rise to multiple equilibria.
