This blog entry is in a series that highlights insights from research for development policies and practice, supported by the Knowledge for Change Program (KCP).
One of the most crucial benefits of empirical research is that it helps us learn from the past, so that we won't repeat the same policy mistakes again. The Covid-19 pandemic initially appeared to be a global health crisis, but very quickly, it morphed into a full-blown economic crisis that has detrimental impacts on people's ordinary daily routines, such as purchasing and securing food. It is estimated that the pandemic may have doubled the number of people facing severe food insecurity by the end of 2020.
There are growing global concerns around food insecurity and what it means for the fight against poverty. Learning from previous food crises in 2008 and 2010-2012, the international community has called for three key actions to be taken in 2021: i) enabling the free flow of food, ii) bolstering social safety nets, and iii) enhancing prevention and preparedness.
We introduce several KCP-supported projects that examine past food crises through these three lenses. We hope that by highlighting these research findings, policy makers can be more informed about how best to manage high-price episodes in future crises and design more efficient and equitable policy packages.
Preventing artificial price spikes that may result from trade protection policies
If there was one lesson that past global food crises had taught us, it would be that trade barriers and price insulation policies, such as export restrictions and border protection policies, were not just ineffective in stabilizing domestic food prices, but contributed to artificial price spikes in staple food items that made vulnerable populations in developing countries worse off. According to World Bank price data, worldwide price of rice increased by 127 percent between 2005 and 2008, and the price of wheat increased by 114 percent. How much of the price surge was due to trade barriers? One KCP project conducted immediately after the crisis demonstrated that 45 percent of the price spike in rice was due to insulation policies and 30 percent of price increase in wheat could be explained by border protection policies. This research showed that the main culprit was the collective action problem. This means that while these measures might have reduced the magnitude of price surges in individual economies, it showed that when all countries responded in the same way, it contributed to price surges worldwide and even helped magnify international price instability. Such policies may engender more negative effects such as destabilizing domestic prices, and obliterating the poverty reduction impacts of the initial increases in world prices.
Bolstering social safety nets and enhancing preparedness against future crises
As decades of research have shown, social safety nets can serve as a protective shield for poor populations against acute food insecurity in times of crisis.A recent World Bank research examined the effects of Ethiopia's Productive Safety Net Program (PSNP), which is a large transfer program that serves as the backbone of the country's social protection system. The research showed that the PSNP has helped offset virtually all the adverse changes that are induced by the Covid-19 pandemic - PSNP beneficiary households were 9.3 percentage points less likely to be food insecure than non-beneficiary households. And the protective power of the program is even greater for poorer households and those living in remote areas. The program's beneficiaries were also less likely to cut spending on health, education, and agricultural inputs. These results show that a well-designed social protection program can significantly reduce the likelihood of vulnerable populations becoming food insecure during crises.
Understandably, public works programs will not always have significant and measurable welfare benefits. A KCP study on Malawi's public works program conducted in 2012-2013 evaluated its effects on food security. The study introduced two variants relative to the standard model of the program: the timing and the payment schedule (lump sum or split payments) and the timing of the program across seasons. There were two levels of randomization: across villages and across households in participating villages. The results were a little disappointing. Malawi's public works program did not improve food security during the study period, nor did it increase the use of fertilizer or ownership of durable goods. Even for the lean season program, the effect on food security of treated households was negligible. These findings contrast with other positive evidence of public works programs that differ in their design and objectives and serve as a reminder that public works programs will not always yield the intended results. Future avenues of investigation into parameters, such as longer duration and more flexible schedules could further enhance the potential impact of these short term social protection tool. Luckily, mid-corrections are possible. We are glad to see that this project's findings fed into the subsequent project on redesigning the public works program in Malawi.
Avoiding lifelong scars that may result from food insecurity caused by the pandemic
A large adverse shock to the economy, such as the current COVID-19 pandemic, could cause permanent scars on a child's life at a later stage, including those that are induced by malnutrition and poor livelihood strategies, resulting from unanticipated surges in food prices. One KCP research project analyzed the long-term economic impact of the 2008 food crisis in rural Indonesia, using Indonesian household data collected in 2007 and 2010. The researchers discovered a significant negative impact on child growth among non‐farming households due to food price spikes, despite government‐backed support programs targeting poor households. The magnitude of the negative impact on the children's height scores was so large that it might potentially lead to insufficient human capital formation and other life-long disadvantages. Furthermore, available mitigation strategies, such as public and private transfers, failed to mitigate food price spike impacts among non‐farmers. This finding underscored the potential impact of large and long-lasting food insecurity on human development.
Since the beginning of the COVID-19 pandemic, the World Bank has been closely monitoring the evolving socioeconomic impacts, including the food security situation, and assessing the size of these impacts. LSMS-supported high-frequency phone surveys on COVID-19 allow for the estimation of the immediate economic impacts of the pandemic in African countries and facilitate tracking of its evolution overtime on a monthly basis. Just after the April-June 2020 outbreak, 61% of the adult population, representing more than 100 million adults, suffered moderate to severe food insecurity in Ethiopia, Malawi, Nigeria, and Uganda. By August, the food insecurity had declined moderately to 58% of the adults, representing 97.6 million across four countries. However, households received very little outside assistance, and their ability to cope with shocks remained limited. Another study provided early evidence of increasing food insecurity in Mali due to the pandemic. It highlighted that urban households were 33 percent more likely to experience moderate food insecurity compared to those in rural areas.
These are just a few early findings from many ongoing research projects by the World Bank's Development Economics VPU. We will continue expanding research efforts on impact assessment of the current pandemic crisis and policy responses to infuse more evidence into policy decisions that may better prepare us for a future shock.
The authors would like to acknowledge contributions from the following projects under the guidance of task team leads (TTLs) and researchers: Storage and Trade Policies for Improving Food Security (TTL: Will Martin); The Role of Public Works Programs in Enhancing Food Security: The Malawi Social Action Fund (TTLs: Emanuela Galasso, Kathleen Beegle); What Happens in Rural Areas when Food Prices Spike? (TTL: Donald Larson ) and a Indonesia study by Futoshi Yamauchi.
About the blog series: The Knowledge for Change Program (KCP) has launched a blog series to retrospectively highlight a selection of research projects conducted over the past 20 years, many of which still remain highly relevant and offer great lessons for development policies and practices today. Managed by the Development Economics Vice Presidency of the World Bank (DEC), the KCP promotes evidence-based policy making through research, data and analytics. To celebrate the KCP's fourth phase launched in November 2020, this blog series will look into the wealth of knowledge researchers have generated in KCP's previous phases, distill lessons learned, and inspire discussions on future research directions.