An analysis of the relationship between income and proteins consumption

Chapter 2
Economic drivers of dietary changes: a literature review
Although I will not explore determinants of food choices other than the economic ones,
it is important to note that many drivers infuence the eating behaviour of a person, a
group of people or a nation. Food consumption is affected by a range of factors
including food availability, food accessibility, geography, demography, income,
urbanisation, religion, culture and consumer attitudes. In the literature the following
determinants of food choices have been found : biological determinants such as hunger,
appetite, and taste; physical determinants such as access, education, skills (e.g. cooking)
and time; social determinants such as culture, family, peers and meal patterns;
psychological determinants such as mood, stress and guilt; attitudes, beliefs and
knowledge about food. The infuences are so many and interrelated that the task to
identify all of them is complicated.
The economic analysis of food choice has a long history, “dating back at least to
the work of Ernst Engel in the mid-nineteenth century” (Young et al. 1998, p. 81).  The
economic  approach to choices is based on the concept of an individual attempting to
maximise his welfare by choosing the preferred outcome from a limited set of options:
consumer choice is constrained, principally, by a limited resources (budget constraint)
and also by other factors, such as time availability and the legal and institutional
framework and the prices in the marketplace. The consumer's problem is to fnd the
most preferred affordable commodity bundle (maximise utility) subject to the
constraints. The demand for a particular food product, in a given time, given tastes and
preferences, depends on the price of the product, the prices of all other food and non-
food products and income (Young et al., 1998).
The focus of this chapter is on economic drivers because they are specifcally
related to the nutrition transition. In the empirical analysis that will follow only the
income (per capita) will be taken into consideration. 
2.1. Food price elasticity 
The most commonly used measure of consumers' sensitivity to price is known as price
elasticity of demand. It is the ratio of the percent change in the quantity demanded to
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the percent change in the price as we move along the demand curve.
If a one-percent drop in the price of a product produces a one-percent increase in
demand for the product, the price elasticity of demand is said to be one. A good with a
price elasticity stronger than negative one is said to be “elastic”, while goods with price
elasticities smaller (closer to zero) than negative one are said to be “inelastic”.
Commodities that are more essential to everyday living, and that have fewer substitutes,
such as staple foods, typically have lower elasticities (Krugman, 2012).
In the economic environment, the cost of food has been identifed as a key factor
affecting demand for various foods (Hawkes, 2010).
 In Andreyeva et al. (2010) 160 studies have been reviewed with this purpose.
Overall, the results of this paper are consistent with economic theory of the demand
response that consider food prices as inelastic. All mean price elasticity estimates were
below 1.0 and ranged from 0.27 to 0.8. Estimates were relatively less inelastic for soft
drinks (0.79), juice (0.76), meats (0.68–0.75), fruit (0.70), and cereals (0.60) and most
inelastic for eggs (0.27), sugars and sweets (0.34), cheese (0.44), and fats and oils (0.48).
Food away from home was most responsive to changes in prices among other categories
(0.81) and more elastic than demand for food at home. As higher estimates suggest
greater changes in purchases as prices change,  foods with higher elasticity estimates are
more subject to respond to public application of tax or subsides. This study suggests that
soft drinks offer a possible target for public health tax policies for  their negative effects
on nutrition. Assuming no substitution of soft drinks with other caloric beverages and no
change in other factors affecting purchasing behaviour, the estimates of the price
elasticity of soft drinks suggest that a 10% tax on soft drinks could lead to an 8% to 10%
reduction in purchases of these beverages.
Other studies have applied economic theories to health-related dietary changes.
In French (2003) two community-based intervention studies are exposed. In these
studies price reductions is used to promote the increased purchase of targeted foods,
because price reduction strategies promote the choice of targeted foods by lowering their
cost relative to alternative food choices. The frst study examined lower prices and point-
of-purchase promotion on sales of lower fat vending machine snacks in 12 work sites
and 12 secondary schools. Price reductions of 10%, 25% and 50% on lower fat snacks
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resulted in an increase in sales of 9%, 39% and 93%, respectively, compared with usual
price conditions. The second study examined the impact of a 50% price reduction on
fresh fruit and baby carrots in two secondary school cafeterias. Compared with usual
price conditions, price reductions resulted in a four-fold increase in fresh fruit sales and a
two-fold increase in baby carrot sales. Both studies demonstrate that price reductions are
an effective strategy to increase the purchase of more healthful foods in community-
based settings such as work sites and schools. Results were generalised across various
food types and populations. French thereby makes the case that reducing prices on
healthful foods is a public health strategy that should be implemented through policy
initiatives and industry collaborations to shift the diet toward healthy alternatives. 
In Goodland (1997) a food conversion effciency tax is proposed in order to
reduce food wastage and to improve health and food availability. He recommended the
least effcient converters (pork, beef) would be highly taxed; more effcient converters
(poultry, eggs, dairy) would be moderately taxed; most effcient converters (ocean fsh)
would be taxed lowest; grain for human food would not be taxed, while coarse grains
might be modestly subsidized. Removal of livestock subsidies, education campaigns,
reallocation of research and development investments away from cattle and towards
grains, starches, fruits and legumes should be the start to shift the diets towards a more
sustainable one and to internalize the externalities of damaging agriculture practises
such as intensive animal agriculture. 
To sum up, the trends of the nutrition transition is of increasing consume of food
that is unhealthy and unsustainable (caloric, high in salt, fat, sugar and mainly of animal
origin). Although the demand of food is considered by economic theory inelastic, several
studies has been done in light of proposals to improve diets by shifting food prices with
economic instruments such as taxes and incentives. The potential of price changes to
improve food choices is evident from growing research on how relative food prices affect
obesity and environment (in particular sugary drinks and meat are being targeted).
There is also a relative consensus that future researches should focus more on predicting
the impact of specifc public policies aimed at improving diets (Andreyeva, 2010), mostly
because structural change in the diets is a primal force not easily reversed by
governments (Delgado, 2003). 
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2.2. Globalisation and trade liberalisation
Closely related to food prices changes is the trade liberalisation. In fact, food prices fall
as a result of trade liberalisation, because it can affect the availability of goods by
removal of barriers to foreign investment in food distribution, such as happened for
multinational fast food chains in the middle-income countries (Kearney, 2010). 
Central to the framework described by Hawkes (2010) is the idea that trade
liberalisation reduces barriers to imports and exports, foreign direct investment and
trade services, and in doing so it infuences diets. In addition, trade liberalisation affects
the whole foods supply chain by infuencing the incentives farmers and agribusinesses
get to produce. Besides, diets are affected by the environment in which consumers make
food choices, conceptualised as food availability, price, and marketing of food. The
result is that over the past 20-30 years, trade liberalisation has led to a more liberal,
global market place for food items. The agriculture sector has however its peculiarities,
because it is characterised by “inelastic demand and slow supply responses, a tendency
for oligopolistic power between producers and consumers, and the immovability of key
factors of production, including arable land and access to freshwater” (Hawkes, 2010, p.
30). 
Hawkes (2010) then provides evidence on how trade liberalisation has facilitate
and infuence the trend of consumption of three foods that are linked to nutrition
transition: vegetable oil, meats and highly processed foods. The nutrition transition in
developing nation usually begins with increases in domestic production and imports of
oilseeds and vegetable oils (Drewenoski et al., 1997). Nevertheless, the nutrition
transition is more often associated to increase consumption of animal products, that
generates a “livestock revolution” (Delgado, 2003). As regard the processed foods, there
are evidence that all over the world people are consuming fewer traditional staples and
more energy-dense foods, high in sugar, fat and refned carbohydrates. With the
globalisation of food systems, availability of processed foods has risen in developing
countries after foreign investments by multinational food companies, such as Coca Cola
or McDonald's, have transformed the traditional diets, offering cheap and abundant
calorie-rich foods (Kerney, 2010). Hawkes (2010) demonstrates that three dynamics
have been critical to this process: frstly, trade liberalisation has facilitate food market
growth in developing countries, as a result of shifts of food production, exports and
investments toward this area of the world; secondly, trade liberalisation has introduced
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new competitions and thirdly, trade liberalisation has enabled positive synergies
throughout the food supply chain. Hawkes concludes that trade liberalisation and
globalisation is not the direct cause of diet change, or a driver of nutrition transition, but
rather “has facilitated shifts and increased the rate of change” (Hawkes, 2010, p. 56) on
the supply and demand side. 
A related debate concerns whether the global food trade has a positive impact on
food  security or not. In theory, removing trade barriers has the effect of reducing food
prices and consequently to increase the access to food by the poorest strata of society.
The FAO suggests that the overall effect on food may be negative and even where food
prices fall as a result of trade liberalisation this is not a straightforward advantage,
because lower price of imports can worsen the food security of domestic farmers
(Hawkes, 2010). 
2.3. Income
The budget constraint has received the most attention in the economic analysis of
choice (Young et al., 1998). There is no doubt that income affects dietary changes,
although the effect of income growth in changing trade patterns differs among
developed and developing countries. 
Normally, low income countries spend a greater portion of their budget on food
and are more responsive to income change than middle and high income countries
(Regmi et al, 2001). Demand elasticity is particularly high at relative low income levels
(Smil, 2002.) Ernst Engel's analysis on household budgets in 1857 explained, for the frst
time, that poorer families have to devote a greater proportion of total expenditure to
food (in Young et al. 1998). This share of food expenditur e on total expenditure drops
back when income increases: an analysis on 51 countries indicated that, on average,
high income countries spend 16% of their expenditure on food, while low-income
countries spend 55% (Regmi et al., 2001). Accordingly, it is reasonable to say that
income is a driver of food choices. 
Furthermore, the magnitude of a country’s response to income and price change
also differs cross food items. Low-income countries, that, as we already said, are
generally more responsive to food price and income changes, spend a greater portion of
their budget on staple food products such as cereals and, when income increases, greater
budget adjustments are made to higher value food items such as dairy and meat, and
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