Economic Well Being in Nicaragua: A Food Share Analysis 2001 & 2005

Transcription

1 EconomicWellBeinginNicaragua: AFoodShareAnalysis 2001&2005 EastCarolinaUniversity DepartmentofEconomics JohannaRetana Summer2009 Abstract TheLivingStandardMeasurementSurveyisastudypreparedbyWorldBankinsomeoftheLess DevelopmentCountries;thegoalofthestudyistodeterminelevelsofconsumption,expenditures, andtomeasurepovertyandgenerallivingstandards.thepurposeofthispaperistousethelsms ofnicaraguaduring2001and2005tocarryoutafoodshareanalysis.

2 Introduction Nicaragua is the largest country in Central America with a population of 5,891,199 1, althoughitisthesecondpoorestcountryinlatinamerica.thecountrywasincivilwarforseveral decades,butthepresentgovernmenthasimposedsomereformstryingtoclosetheincomegapand improvewelfare. The World Bank prepares the Living Standard Measurement Study (LSMS) in order to determine levels of consumption, expenditures, and to measure poverty in some of the less development countries included Nicaragua. This paper uses the LSMS of 2001 and 2005 to make some poverty and food share analysis. The food share analysis is a measure of welfare on the population,anditisintendedtomeasurethefractionofthetotalexpenditureofafamilythatfood represents. The paper includes graphs of the distribution of the households in urban and rural areas, thelorenzcurve,themainproductsconsumed,thedistributionoftheconsumptionpercategory, thepovertydistributionofthepopulation,andfinallythefoodsharedistribution. 1 consulted on July 27 of 2009

3 DataAnalysis Graph1 DistributionofHouseholds,UrbanRegion Percentage Source:Table1 Approximately the 60% of the Nicaraguan population live in urban regions. Managua has morethan20%ofitspopulationlivinginurbanareas,whiletheatlanticareahaslessthan5%ofits populationlivinginurbanareas.thereisnotabigdifferenceinthedistributionbetween2001and 2005; all the regions have a slight decrease in the urban areas population except for the Atlantic region that has an increase of 1%. The urban population has more access to services such as drinkingwater,betterinfrastructure(bridges,roads,hospitals),consequentlythelivingconditions inthisareaissuperiorthanintheruralarea. Graph2 DistributionofHouseholds,RuralRegion Percentage Source:Table1 The concentration of the Nicaraguan population living in rural areas represents around 40%.Thecentralregionhasthehighestpercentage(around18%)ofpeoplelivingintheruralareas whilemanaguahaslessthan5%.thispartofthepopulationismorelikelytobeinpovertyandhas limitedaccessofpublicservices.

4 Graph3 LorenzCurve Source:Table3 The Lorenz curve is one of the most used tools for examining the distribution of consumption;itrelatesthecumulativefractionofthepopulation,startingfromthepooresttothe richest,againstthecumulativeconsumption.thebluelineinthegraphrepresentsperfectequality, andtheredandgreenlinesrepresenttheyear2001and2005respectively.nicaraguaisfarfrom havinganequaldistribution;halfofthepopulationhas30%lessconsumptionthanthetop20%of the rich population. This means that 50% of the poorest is responsible of around 20% of total consumption, while the richest 20% accounts for 50% of the consumption, the remaining 30%, representedbythedeciles6 th,7 th,and8 th correspondstotheconsumptionofthemiddleclass. ThedatashowsaslightdifferencebetweentheLorenzcurvesoftheyearsinstudy,butthis differenceisappreciablefromthedeciles5 th untilthe9 th,thismeansthatthepoorest50%andthe richest20%ofthepopulationareinthesamesituationfrom2001to2005,thereforethedifference inconsumptionisduechangesinthemiddleclass. AccumulatedConsumption Accumulated Population Graph4 Mainproductsconsumedatnational,generalpovertyandextremepovertylevel PercentageChange Source:Table4 Thetop10productsconsumedforthepopulationinNicaraguaare:rice,milk,bread,corn, plantain, beans, sugar, tortillas and oil. Nicaraguan families have different methods for the

5 acquisitionoffood;itcanbeeitherbought,suppliedbyanemployeroritcanbegrowninfamily farms. The consumption of milk, beans and bread are the only products that reflect a positive percentage change from 2001 to 2005, this means that the consumption of these products have increased.therestoftheproductsshowadecreaseintherateofconsumption.milkistheproduct withlargerincreasedinconsumption,andtheincreaseinismainlyduetothepopulationingeneral poverty. Rice consumption has an increase in the national and extreme poverty level, while its consumptioningeneralpovertyreduced.cornhasaninterestingbehavior,atnationalandgeneral poverty level the consumption decreased, but its consumption by the poorest increased by more than 2%. Plantain, tortillas and oil consumption have decreased to year to year, with largest decreaseoccurringintheextremepovertypopulation. Graph5 Mainproductsconsumed Extremepoverty2005 Source:Table4 In2005themainproductconsumedbyfamiliesinextremelypovertywascorn,andwhen riceandmilkareaddedwegetmorethan50%ofthetotalfoodconsumption.these4productsare major source of carbohydrates but not a good source of protein and vitamins. This can lead to malnourishedchildren,whichcouldresultinlowgradesatschoolandanincreasedinthedropout rateineducation.although,thiseffectcanbereducedbythefactthatpublicschoolsprovidelunch orrefreshmentstostudents.

6 Graph5 DistributionoftheConsumption PercentageChange, Source:Table5&6 The distribution of the consumption in Nicaragua is segregated in 5 main groups, food, house, health, education and others. The category food includes all the items consumed by householdmembers;itcouldbeobtainedasapurchaseinthesupermarket,aspartofapayment for a job, as a donation, as a gift or from family farms. This group has experienced a percentage reductionof2%from2001to2005.so,familiesarespendinglessoftheirtotalexpenditureinthe purchaseoffood. Housing constitutes the expenses on rent and payment of a mortgage; this sector has the largestpercentagechangebetweentheyearsofstudy,itrepresentsaround4%to6%ofthetotal expenditure. This can be explained by the presence of a new government since 2001, which has beentryingtoimprovetheconditionsofthepopulationforexample,bybuildinghousesforpoor families. Thecategoryofhealthconsistsofthealltheexpensesofthehouseholdmembersonhealth careandinsurances.educationconsistsofenrollmentandtuitionexpensesaswellasthepurchase ofuniformsandbooks.therehasbeenalittlechangeinthenationalconsumptionofhealthfrom 2001 to The category others includes transportation cost (buses and taxis), purchases of personalitems,andothermiscellaneousitems. Theconsumptionpatternschangefromtheruralandurbanareas.Theruralareasspenda greater portion of their expenditure in the purchase of food. In 2005 it represented 60% while housing, health, education and others accounted for the remaining 40%. Managua has a greater urban population because it is the largest city and the capital of the country, therefore its food consumptionsexpenditureislowerthattheotherareas.

7 Graph7 ConsumptionDistribution Source:Table9 The consumption distribution is the key to determine the economic conditions of the population.in2001thenon poorrepresented54%ofthepopulationbutconsumed81%;in2005 therelationwassimilarwherenon pooraccounting52%ofthepopulationconsumed82%.onthe otherhand,in2001poorpopulationinnicaraguaconsumed15%butrepresented46%ofthetotal population, while in 2005 poor people consumed 13% and corresponded to 48% of the total population. Thisdatarevealsthatfrom thenon poorpopulationincreased2%andthetotal consumption decreased 2%. The share of the expenditure allocated to the purchase of food is inverselyrelatedwiththeleveloftotalexpenditure,sothepoorerthehouseholdisthegreaterthe portionofthespendinginfood. Graph8 FoodShareDistribution 2001&2005 Source:Table10 Thefoodsharedistributionshowsthatatnationallevelthepopulationusesmorethan45% oftheirtotalexpenditureonfood.thereisaslightreductionfrom2001to2005of2%.thenon poor fraction of the population utilizes 43% and 40% in 2001 and 2005, respectively in the

8 consumptionoffoodoftheirtotalexpenses,andthepoorsegmentofthepopulationconsumes60% oftheirexpenditureisfood. Conclusion Nicaragua slivingstandardsarelow,morethan40%ofthepopulationlivesinsomekindof poverty. This paper presents how the poorer 50% of the population consumes 20% of the total consumption while the richer 20% consumes 50%. These results reveal the inequality in the distributionofincome. Comparisonsweremadebetweentheruralandtheurbanareasandthepovertyconditions areworseintheruralarea.theconsumptionofthe10mainproductsshowsthatcorn,rice,milk, and beans are the principal food products consumed in the country, and therefore it can be concluded that the diet is not very balanced and this generates malnourishment especially in children. The consumption distribution demonstrates that the Nicaraguan population in 2005 consumesatnationallevel45.3%oftheirincomeinfood,14.2%inhousing,6.3%inhealth,5.5%in education and 28.7% in others areas such as services, transportation, and items of personal use. Themostsurprisingvalueistheportionoftheexpenditureusedtobuyfood.Althoughtherewasa decrease in the percentage change between 2001 and 2005 of 2%, almost half of consumption is stillonfood Thefoodshareanalysisshowsthatthein2005thepopulationconsumed2%lessonfood thanin2001.thechangewasduetothenonpoorfractionofthepopulationshowingandecreaseof nearly4%eventhoughthepoorspentalmostahalfofapercentmoreonfood.thisresultedina netdecreasedintheexpenditureoffood.

9 Tables Table1 DistributionofHouseholdsperRegion Percentage2001 Total Urban Rural National Managua Pacific Central Atlantic Source:LivingStandardsMeasurementSurvey2001and2005 Table2 DistributionofHouseholdsperRegion Percentage2005 Total Urban Rural National Managua Pacific Central Atlantic Source:LivingStandardsMeasurementSurvey2001and2005

10 Table3 Distributionofconsumptionperdecilesandpercentagechange 2001and2005 Deciles %Change Source:LivingStandardsMeasurementSurvey2001and2005 Table4 Mainproductsconsumedatnationallevel,generalandextremepovertyandPercentageChange National GeneralPoverty ExtremePoverty % % % Milk Rice Bread Corn Plantain Beans Sugar Tortillas Oil Source:LivingStandardsMeasurementSurvey2001and2005

11 Table5 DistributionoftheConsumption Percentage2001 Food House Health Education Other National Urban Rural Source:LivingStandardsMeasurementSurvey2001and2005 Table6 DistributionoftheConsumption Percentage2005 Food House Health Education Other National Urban Rural Source:LivingStandardsMeasurementSurvey2001and2005 Table7 PovertyDistribution 2001 Nonpoor Poor NonExtremePoor ExtremePoor Managua Pacific Urban Pacific Rural Central Urban Central Rural Atlantic Urban Atlantic Rural Source:LivingStandardsMeasurementSurvey2001and200

12 Table8 PovertyDistribution 2005 Nonpoor Poor NonExtremePoor ExtremePoor Managua Pacific Urban Pacific Rural Central Urban Central Rural Atlantic Urban Atlantic Rural Source:LivingStandardsMeasurementSurvey2001and2005 Table9 ConsumptionDistribution Non Poor Population Poor Population % Source:LivingStandardsMeasurementSurvey2001and2005 Table10 FoodShareDistribution National NonPoor Poor % Source:LivingStandardsMeasurementSurvey2001and2005

13 References Bishop, J; Formby, J; Zheng B. Regional Income Inequality and Welfare in China: A Dominance Analysis, Asian Economic Journal, Journal of the Easr Asian Economic Association,Vol.10,No3,1996. Deaton,Angus.TheAnalysisofHouseholdSurveys:AMicroeconomicApproachto DevelopmentPolicy,TheJohnHopkinsUniversityPress,BaltimoreandLondon,World Bank, hare+analysis#ppp8,m1