The Effect of Price and Income Changes on Food-Energy Intake in Sri Lanka

Abstract

Data is used to analyze the food acquisition behavior of households from a 1980/81 survey designed to be nationally sectorally and regionally representative of Sri Lanka. The poor are shown to be much more responsive to price and income changes than other income groups. The urban population generally exhibits lower income elasticities of demand for food commodities. The poor appear to efficient substitutors thereby mitigating the effects of a price change on caloric intake. The important exception is rice whose elasticity of calorie consumption with respect to price was about 4 times higher than for any other commodity. The reluctance of households to substitute for rice even when faced with rising prices coupled with its large budget share show rice to be the most important consumption good. Higher rice prices are an important determinant of poverty for landless and urban workers. Moderating food prices preferably through technological change is a key ingredient to raising consumption among the poor. Simulations show that even if there are rapid and proportional increases in expenditures of all income groups this will not dramatically increase caloric intake among the poor. However if the absolute value of the increase in real expenditures were distributed equally to all households there would be a marked increase in the % of households consuming an adequate diet.