Vulnerability to Food Insecurity: A Decomposition Exercise for Rural India using the Expected Utility Approach

Abstract

Devising multi-pronged strategies for those highly prone to food insecurity in the future remains a challenge for food policymakers. This set of food-insecure households faces different kinds of shocks (economic, political, environmental, pandemic, personal, etc.), which render them vulnerable to food insecurity. This study identifies those who are vulnerable to food insecurity, and will be useful for policymakers to resolve food insecurity related challenges in crisis or no crisis periods on an ex-ante basis. This paper decomposes the total welfare loss resulting from vulnerability to food insecurity into components due to ‘food poverty’ (expected consumption of the current food secure falling below the food poverty line), and risk (variability of food consumption over time). The last term can be further decomposed into the aggregate (region or community-specific), and idiosyncratic (household or individual-specific) risks. The paper identifies the key determinants of the different components of vulnerability to food insecurity based on household consumption expenditure surveys conducted in rural India in 2004–05, 2009–10, and 2011–12. Expected utility-based measures, and pseudo-panel regression techniques were used to identify risk-prone households. The key findings are: idiosyncratic risk is the largest driver (a loss in the utility of almost 51%) as compared to the poverty and covariate shocks; states with poor Public Distribution System (PDS) performance are more susceptible, a rise in the price of staple food items increases the chances of food insecurity, gendered disparity persists over time, forward social and religious groups are more vulnerable, and finally a higher level of urbanization increases the exposure and sensitivity to shocks (like the spread of contagious diseases), disrupts the supply of food commodities from rural markets, loss in income, and increase in rural vulnerability to food insecurity. Our key policy suggestion is a mix of cash versus in-kind transfers to resolve rural food insecurity related issues, tend towards resiliency, and simultaneously tackle the triple burden of malnutrition and SDG-2 related goals.