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Ahmed Tritah∗ GREMAQ, Universit´ des Sciences Sociales, Toulouse, France e July 7, 2003
Abstract This paper investigates the eﬀect of food subsidies on food security and poverty in India. Using propensity score matching methods I found that while the PDS has a poor record on reaching the poor, conditional on having access to PDS, the subsidy is entirely consumed. Moreover I found that food subsidies going through the PDS exert a multiplier eﬀect on quantity consumed. This ﬁndings point to a reevaluation of the impact of PDS with respect to its main objective which is food security. I propose a new poverty measure, integrating the food content of poverty lines and shows that relative to this poverty line PDS has beneﬁted the poor.
I thank the World Bank Economic Development Research Group, for its hospitality during the winter 2003 and for providing me with the data, and in particular Klaus Deininger and Dina Umali Deininger from South Asia Rural Development Sector, for giving me the opportunity to undertake this research. The usual disclaimer apply.
Over the past decade a series of events in India have brought the question of food security into sharp focus (UNDP 1999). According to the Food and Agricultural Organization , India alone accounts for over 400 million poor and hungry people. For a nation long inured to scarcity and starvation the problem is ironic: it is the one of plenty. Why in a food surplus nation where buﬀer stock are three time what is required for food security, thousands still die of malnutrition and hunger? While the objective of food security has been reached, the fundamental individual right for food has not. The purpose of the present research is to evaluate the impact of the Indian Public Distribution System (PDS) on poverty and food security. The results are of immediate policy interest with respect to the current debate and re-shaping of the Indian Public Distribution System. Of all the safety net operations that exist in India, the most fare reaching in terms of coverage as well as public expenditure on subsidy is the PDS. PDS provides rationed amounts of basic food items (rice, wheat, sugar, edible oils) and other non food products (kerosene, coal, standard cloth) at below market prices to consumers through a network of fair price shops disseminated over the country. While measurement of poverty is a heated issue in India (Deaton 1999, Deaton and al. 2000) to the best of my knowledge only one study has quantitatively evaluated the extend to which PDS alleviate poverty (Rafhakishna and al, 1997). The PDS had been criticized for its urban bias and its failure to serve eﬀectively the poorer sections of the population. As main of studies on beneﬁt incidence of ﬁscal transfer, this evaluation of PDS failed to consider the counterfactual and take the ﬁscal 2
transfer as the net gain accruing to the poor using PDS. My claim here is that recent advances in program impact literature provide powerful tools to evaluate the beneﬁt incidence of ﬁscal transfer through food subsidy on food security and poverty. The power of these method is that by controlling for selection into the program the implicitly take into account behavioral heterogeneity and estimate the impact net of this heterogeneity. Since June 1997 PDS turned into the Targeted Public Distribution System, the aim is to target the poorest household by diﬀerentiating the access quantities and prices at which one is allow to buy. The diﬀerentiation is made with respect to the state oﬃcial poverty lines. Those households below the poverty line (BPL households) are entitled with ration card that allows them to buy more quantity at a higher subsidized price. The main issue of TPDS is that as any targeting program it will always involve, albeit to diﬀerent degree, problems of imperfect targeting. That is the system is likely to include people that should be excluded and exclude household that should be included. However targeting for food is somewhat more problematic because it deals with contingencies that one can not perfectly foreseen. In particular you may not need the government aid today but tomorrow if your income fell you will need it. Hence it is not clear given this contingencies how one should design a system targeting to those in need at every time. One way to do that is to introduce the concept of self-selection. That is to say that the program is designed in such a way that those who are not targeting have no incentive to go into the program. This paper estimates the expenditure gains and the reduction in poverty if any that is attributable to the TPDS. For this purpose I apply recent
1997. 1983. These methods allow us to draw a statistical comparison group to TPDS users from the same survey. Heckman et al. I will just consider the impact of fair price shops on poverty assuming away any general equilibrium eﬀect on prices and quantities due to TPDS.advances in propensity score matching methods (PSM) (Rosenbaum and Rubin. and no doubt that by insuring a minimum price to producer it has impact on open market prices that can not be evaluated without using a general equilibrium approach. This potential user can then form a control group along which the impact of the treatment is evaluated. what we are doing here is a partial equilibrium analysis. 1998). Hence any feasible evaluation method need to be considered as an upper bound of the impact of PDS. 1983. An important advantage of PSM methods here is that the are suitable to studying the heterogeneity of program. However matching on propensity score rather than arbitrarily set of characteristics is the optimal method and have received a renewed interest since the seminal paper of Rosenbaum and Rubin. Matching methods have been quite widely used in evaluations. 4 . However one should bear in mind that Food Corporation of India has as much as three times the necessary quantities needed to insure food security. A number of feature to TPDS make it suitable for PSM methods. Other evaluation methods requires randomization or a baseline and this is not available here since the program has a nation wide coverage1 . This is of obvious interest here since 1 However I can identify a set of non TPDS users that have not used TPDS for exogenous reasons I can get ridd of bias due to selection into the program. Studies have show that PDS has pushed private prices upward (Dumali and al 2001). TPDS has large impact in the Indian economy.
g. Deaton 1997): it follows that food security should be a major focus of policies concerned with well being in this society. The central government based on the population state and its share of below poverty line households and above The fooshare is remarkbly stable within the three ﬁrst quitile of the income distribution around 75% it strated to decline at the fourth quintile.. which now support the largest network of ”fair price shops” in the world. soft cake and kerosene oil at subsidized prices. Of the 200 million tones of food grains produced in 1999-2000. Section 4 present the data and primary descriptive statistics. The following section discusses in more detailed the ﬁscal content of PDS.TPDS is precisely targeted toward the poor. The methods for identiﬁng the impact on poverty and food security of PDS are described in section 3. Food share is an inverse indicator of welfare2 (e. In terms of both coverage and public expenditure.1 The Indian Public distribution system The ﬁscal background The rural Indian spend 64% of its budget on food. The PDS is managed by state governments. the most important food safety net is the Public Distribution System. 2 5 . one should observe a greater impact among the poor than others. edible oil.. 2 2. Identity of beneﬁciaries are important for designing better policy and determine links between poverty and other characteristics that hamper or on the contrary favor better targeting. Section 5 gives the impact estimates on poverty and food security? Section 6 concludes.(458499 shops in 1999). wheat sugar. These provides rice. about 29 million where produced by the government under PDS.
At that time the country was threatened by national-level food shortages and there was rapid food price inﬂation. the public delivery. there was universal entitlement to the PDS but it has since Note that this raises a problem of three level targeting. and the list of commodities provided. There is enormous variation in the density of the fair price shops as also in the regularity of supplies both across and within states. By the 1980s. Locations of the fair price shops are determined by the oﬃcials at the district level3 . which in turn target the fairprice shops and quantities to the population. As a result the welfare component of the PDS gains strength in the 1980s . The government also determines the Central Issue Prices (CIP) for commodities. The government ﬁrst target quantities based on state poverty estimation. determine the total procurement of food grains and total allocation across states. 3 6 . with and explicit view to reaching areas of high poverty incidence. when it was considerably extended to rural and tribal blocks. The PDS took shape soon after the Bengal famine in 1943. Until 1992. India had generated a surplus of foodgrains and the incidence on poverty had declined progressively for about 50 per cent in the 1960s to about 30 per cent in the 1990s. The state government then determines the oﬀ-take.poverty line households. In the context of currency devaluation and economic reform in the 1990s. The state government is allow to add to the CIP the transactions cost of keeping the stock and of delivering. especially in urban areas. It evolves in the 1950s and 1960s as a mechanism for providing price support to producers and at the same time as providing food subsidy for consumers. Every unit level make decision based on speciﬁc information for targeting which is in some extent private knowledge. Then the state target the distribution of food to the local district. procurement and issue prices of PDS commodities were increased leading the government to mitigate the adverse welfare consequences by better targeting of PDS to the poor.
Umali Deininger and Deininger 2001.(e. While the cost eﬀectiveness of the sys7 . When asked the main reason why people have not used fair price shops is that because the commodities were not available in suﬃcient quantity or quality.2 The evaluation problem India is embarked on a program of economic reforms in 1991 with the objective of achieving macroeconomic stabilization and structural adjustment. the latter being closely tied to getting prices right. This was done in June 1997. The problem of crowding out eﬀect may exist if the poor are credit constraint and if they rich are not. Hence the move towards slimming the system and targeting the subsidy at the poor. In 1997 it was replaced by the Targeted PDS (TPDS).been restructured. World Bank 1998b). These authors have also argues that the PDS has a poor record on reaching the poor. Those classify as non poor get no subsidy though they are served by fair price shops. Both processes encourage government expenditure reduction and the removal of subsidies. 2. There is still a debate on whether the PDS should be phase out and replaced with more eﬀective instruments for reaching the poor.in which targeting was shifted from poor regions to poor households and the subsidy diﬀerential between the poor and non poor was widened.g. In this context the PDS has commended considerable attention. which can play a useful distributional function in areas where private shops have not emerged. 10kg of foodgrains were available at a highly subsidized price per family per month for families below the poverty line. It has been argued that it is an obsolescent and ﬁscally unsustainable institution. moving through a universal public distribution system toward a targeted public distribution system. More speciﬁcally.
The with data are observable while the ”without” data are fundamentally unobservable. ignoring any behavioral responses. For that we need to investigate the beneﬁt incidence of TPDS that is (1) access of poor to foodgrains at subsidized price and (2) conditional on the access we need to evaluate the progresivity of the TPDS with regard to poverty. However one should keep frmly in mind that this is in part based on the esimated oﬃcial measure of poverty. that the indian governement determine its food security policy. That is are the poor more likely tu use PDS than others? Conditional on access does the poor beneﬁt more in absolute term than others?Conditional on access are the poor beneﬁting more than proportionately to their overall share of income or expenditure? To what extend are the impact translated into poverty variation ﬁgures4 ?. The poverty impact of TPDS is the diﬀerence between poverty level with the TPDS and the poverty level without it. This is to assume that those aﬀecting by PDS does not change their consumption behavior as the result of PDS.tem has been put in scrutiny. Attention paid to poverty variation ﬁgure may seem at odd with the objective of food security and quite sinikal. but fail to consider the without eﬀect on quantities. we still lack a program evaluation impact of TPDS. This is the well known problem of causal inferences (Holland 1986). Beneﬁt incidence of PDS has two component the price and the quantity the overall being the product of both. is straightforward but ignore the counterfactual taking the transfer as the net beneﬁt accruing to household. Common practice for assessing the distributional and poverty impact. Hence a bad accounting of poor in India has a uge impact on the humanity well-being 4 8 . Previous evaluation consider only the with and without the program eﬀect on prices. the ﬁscal beneﬁt incidence analysis.
5 9 .1 Identifying the impact on poverty Measuring poverty in India5 Estimates of poverty in India are typically based on normative minimum calorie intake. this has no eﬀect on the HCR. The design of the NSS55 make it diﬃcult to compare it with previous surveysn and hence to draw a time proﬁle for poverty rates.rupee for the poor which represent an average of 5. Whereas most of the work on poverty and PDS present the HCR this measure of poverty has serious limitations as poverty index. Poverty line are calculated using the income method and involve the calculation of the minimum income at which the speciﬁed minimum nutritional needs are satisﬁed. Similarly. a small increase in the average per capita income could lead to misleadingly large decline in the HCR. Agregregate and average poverty are then displayed using the Head Count Ratio (HCR). And this may lead to some perverse properties6 . given the consumption pattern of the population. If poor household are heavily ”bunched” near the poverty line. 6 For instance an income transfer from very poor person to someone who is close to the poverty line may lead to a decline in the HCR.4 percent Poverty measurement in India is a heated issue.3 3. I this study I use oﬃcial poverty line to derive my poverty level estimates. The calorie norms were ﬁxed at 2400 calorie per person per day for rural areas and 2100 per person per day for urban areas by the Task Force constituted by the planning commission in 1979. A related issue is that changes in HCR can be highly sensitive to the number of poor household around the poverty line (sine changes in HCR are entirely driven by the crossing of the poverty line). For one thing it ignores the extent to which diﬀerent households fall short of the poverty line. if it lifts the recipient above the poverty line. The average estimated transfer is around 13. if some poor household get poorer.Deaton has reevaluated poverty levels using diﬀerent poverty lines than the oﬃcial one and found a lower poverty rate than the oﬃcial ﬁgures.
That is had the PDS not been in place would the household consume more or less have they to rely on open market and other sources of provision with which TPDS may be a substitute.2. This is a diﬃcult question to answer since the impact of PDS is pervasive in the indian economy at all level through producers to consumers. whereas it is 16. and has a straightforward interpretation.1 Estimating the beneﬁt impact of TPDS The beneﬁt incidence approach I want to answer how much is the variation in Indian poverty attributable to PDS. More sophisticated poverty index help to circumvent the ”density eﬀect”. 3. Essentially the poverty-gap index (hereafter PGI) is the aggregate shortfall of poor people’s consumption from the poverty line. This index avoids the shortcomings of the HCR. Hence the ”density eﬀect” has to be kept ﬁrmly in view in the context of evaluating the welfare impact of PDS and regional disparities of impact. suitably normalized. Hence the focus here will be on the fair price shops aspect of PDS rather than the whole system.6 percent of total monthly expenditure per capita. is relatively simple to calculate7 .8 rupee for APL household.2 3.of total monthly expenditure per capita. representing 3. In this paper I focus on the simplest member of the FosterGreer-Thorbecke (FGT) indexes class: the poverty gap index. I Evalu7 give the formula 10 . State disparities in HCR are diﬃcult to interpret in the absence of further information about the initial density of poor households near the poverty line in each case. The PGI can also be interpreted as the HCR multiplied by the mean percentage shortfall of consumption from the poverty line (among the poor).
The open market and subsidized price are estimated from the NSS survey data on quantities and values of expenditure. hence income gain given to a household (∆y) is deﬁned as: ∆y = qr (pm − ps ) (1) where pm and ps are the open market and subsidized price. The approach is widely used in estimated beneﬁt impact of ﬁscal redistribution. More precisely. For estimating the poverty measures I have used the beta type Lorenz curve speciﬁed as: 11 . These poverty lines diﬀer for rural and urban areas. I use the oﬃcial poverty line provided by the planning commission (GOI. (1997). The state-speciﬁc poverty lines have been estimated by evaluating a common basket of consumer goods for reaching a minimum calorie intake. the subsidy transfer or income gain to TPDS is deﬁned as the expenditure that the household would have incurred in the absence of PDS and the actual expenditure under PDS. at the prices prevailing in the respective States. In the paper the extent of poverty is measured by head count ratio in the total population. It is measured by multiplying the quantity of purchases from PDS with the diﬀerence between open market price and PDS price.ate here the beneﬁt impact of PDS as a redistributive mechanism assuming away any speciﬁc impact on food security. 2000). It has been applied to PDS by Radhakrishna and al. The extent of poverty is measured by the poverty gap ratio.
by inverting Eq.3. p and L(p) are the population proportion and share in income. Results are presented in section 5. ps ) and the poverty line z(pm . pr ). The expenditure of individual i in state s can be represented as Yis (pm . ps ). The poverty measures estimated from L(. G and ζ are the parameters. that is the post treatment poverty level. ps ) using poverty line z(pm . The main weakness of the method is that it fails to take into account the counterfactual and assume no change in consumption pattern due to PDS. Failure to control for access 12 ./Y (pm )).L(p) = p − Qpα (1 − p)ζ (2) where.1./Y (pm )) using poverty line z(pm ) would form the base scenario./Y (pm . ps ) would give the per capita expenditure at market prices Yi (pm ). (3) In the NSS survey expenditure per capita and poverty line reﬂect the prevailing prices at the state level. However I will comment on the weakness of this method for evaluating PDS. so that I can then retrieve the head count ratio estimated from the distribution of L(. The poverty line at market prices Z(pm ) can be estimated from the distribution of L(. The beneﬁt incidence analysis measures the change in the poverty measure when the income gain due to subsidized commodity is substract from Yi (pm ). The poverty ratio (head count) H is obtained by solving: L0 (H) = z/m where z is the poverty line and m the mean income. ∆yi to Yi (pm . and Q. Adding to the income gain from subsidies to individual i.
that is what would have been the food expenditure have the PDS not been in place. These data are then compared with data on the same individuals once they have actually participated in the program. but observed before the program was implemented. In what follows I present the potential outcome approach to which PSM belongs and try to address this critics. Alternatively.2. This reﬂexive comparisons consists in collecting baseline data on probable eligible participants. before the program was instituted. potential participants are identiﬁed and data are collected from them. In this case the set of counterfactual group is the set of participating individuals themselves.to PDS leads to wrong estimate of impact since it does not distinguish the access impact from the program impact. Contrary to PSM. the method is not suited for behavioral approach that allows to deal with selection issues. It may be appear that PDS is non progressive because of non random placement for example. 3. The potential participant in the TPDS are all the household.2 Potential outcome approach To fully take into account beneﬁt incidence of PDS I need the counterfactual associated to the PDS user. The good measure is the one that say what is the change in food insecurity due to PDS. The best way to answer this ”program evaluation” would have to devise an experimental control group comparison. however one should distinguish access 13 . The other critic which is speciﬁc to a food security program is that it evaluates PDS with respect to a wrong measure. The potential participants who do not participate form then the control group. However only a random sub-sample of these individuals is actually allowed to participate in the program.
that is to rebuild a comparison group based on a set of observable variables and hence at least to control for observable heterogeneity.to quantity from access to subsidy. Another way is to use an Instrumental Variable Estimator (IVE) controlling for the andogeneity of PDS or selection on observables.. The claim can not be maid for several reason. Only poor identiﬁed by a ration card have access to the subsidies. First this is a non parametric technics and as such does not rely on speciﬁc functional 14 . there are behavioral aspect that can explain that the non poor not using PDS are not a random sample of poor. ﬁrst there are transaction costs payed for accessing to PDS (distance to fair price shops. Can we claim that poor non participant are random poor and constitute the counterfactual. The matching approach has several nice property that make it suitable for the present analysis and that also explained its recent revival in the evaluation literature. This behavioral aspects comprise solidarity networks and other informal exchanges in food provision that can substitute for PDS for instance. Another strategy is to use matching techniques. Second. none of these variables are present in the NSS. For that one need to have good instrumental variable that explain the access to PDS but not the quantity consumed conditional on participation. queuing. A good set of variable are geographical variable or macroeconomic variables. Moreover IVE causal inferences rest on the ad hoc functional form assumptions required by standard (parametric) IVE. This exclusion restriction assumption in untestable.) that varies due to fair price shops density. Hence randomization appears more like a theoretical concept which can hardly be empirically invoked in my context. in particular in labor economics.
Let w be the outcome on which the program impact on.e.e.form. 15 . Balancing of pre-treatment variable given the propensity score8 If p(X) is the propensity score. 8 See Rosenbaum and Rubin (1983) for a proof. i. Unconfoundness given the propensity score. then D ⊥ X | p(X) Lemma2. i. let X be a set of variable that helps to predict program participation. w0 ⊥ D | X Then assignment to treatment is unconfounded given the propensity score. w1 is the outcome if treated and w0 the outcome if not. and let D be the dummy variable equal to one if individual i has participated into the program. Matching on the propensity score help to circumvent the dimensionality problem. Suppose assignment to treatment is unconfounded. The application of PSM and its power rest in the two following lemma: First note that: P (Xi ) = Pr(Di = 1|Xi ) and 0 < P (Xi ) < 1 (4) Lemma1. w1 . Specoﬁcally.
My control and treated group was administered the same questionnaire and the economic environment can be considered as similar. w0 ⊥ D | p(X) Other consistency conditions not often stated but empirically required is that the treated and control need to have the same questionnaire and to be from the same economic environment. Despite the size of the program coverage and the federative system. The propensity score is estimated using a standard logit model.w1 . Comparing matching method with experimental benchmark design. The second lemma state that if potential outcome are independent of participation given X then they are also independent of participation given p(X). Hence matching will be done on observations whose PS belongs to the intersection of the supports of the PS of 16 . Hence conditional on the propensity score exposure to treatment is random. This balancing property is testable and determines variable to include in the propensity score estimation to satisfy the test. Heckman et al (1997. Potentially more important than bias due to selection on unobservable. Following lemma 1. The questionnaire need to include data that helps to predict participation. India remains a highly centralized country and highly regulated in particular for the agricultural sector. If the Balancing Hypothesis is satisﬁed pretreatment characteristics are independent of treatment status given the same propensity score. 1998) shows that failing to control for matching on the common support of the control propensity score distribution with that of the treated is the single most important source of bias.
treated and controls. The averate Practically this what I would have done with IVE. Hence two things need to be distinguished here to evaluate the impact of PDS on poverty. Poverty line in India are constructed based on an estimation of the minimum income needed to attain a calorie intake of 2400. including the inverse of mills ration to correct for PDS acsess. leaving this for further research. I now have to discuss precisely what are the impact to study. I would have chosen to match on all observation using kernel weighting. Second one has to estimate how this one rupee of ﬁscal transfer translate into oﬃcial poverty ﬁgures. 9 17 . Using the PS from the logit regression I construct matched pairs on the basis of how close the scores are across the two samples. Since the ultimate goal of PDS is to increase food quantity that accrue to the poor one need to evaluate the food content of one rupee of ﬁscal transfer. First I need to estimate the impact of PDS on food security. Hence the program impact I am seeking for is a non parametric analogue of the treatment coeﬃcient of an Engel curve estimation of foodshare based on PDS user and controlling for selection within the treatment9 . In this application I choose to match on the 5 nearest neighborhood. I will deal with the ﬁrst issue here and sketch how one can deal with the second issue. however here the control is just the double size of the treated and I will face the risk of very high attrition of the sample of treated that may render meaningless the study of treatment heterogeneity. The nearest neighborhood to the i0 th treated is deﬁned as the non participant treated that minimizes [p(Xi ) − p(Xj )]2 over all j of the set of non participants. if the control size were much larger than what I get here.
I use the 55th round of the survey started in July 1st 1999 and completed the 30th of June 2000. and this was done by the Planning commission of the GOI. The National Sample Survey (NSS) is a quinquennial survey started by the government of India in 1950 to collect socio-economic data.treatment eﬀect on the treated is: p np X X AT ET = (wj1 − Wij wij0 )/P j=1 i=1 (5) where wj1 is the post intervention household foodshare of PDS user j. The questionnaire distinguish consumption from the PDS and from other sources and in particular the open market. 4 The data and description The data are from the National Sample Survey Organization (NSS0). This data contain detailed information on values and quantities of household consumptions included services like education or health. For each household I am able to estimate the price paid at the PDS and the price paid in the open market if both sources of provision have been used. The survey cover the whole of the Indian Union. P is the total number of user. This survey allows one to estimate the poverty lines. however I will conﬁne the analysis to the 16th most important states covering 98 per cent of the population. ﬁrst because this is the main food elements provided in the fair price shops 18 . In this study I restrict the analysis on foodgrains consumption. wij0 is the household foodshare of the ith non user matched to the j th user. N P is the total number of non user and Wij ’s are the weights applied in calculating the average foodshare of the matched non user.
19 . a household is considered as beneﬁted from PDS if he has consumed at least one PDS commodity. I leave this for further reseach. To set the methodology and for a ﬁrst approach I will analyses here the impact of PDS on rural households10 . they are also those who consume more quantities from PDS. second.1%.23%) households have not used PDS and 17458 (35. I have a sample of 74999 rural households. this is the poorest deﬁned by the bottom quintal that use more PDS. these might be diﬀerent from purchases data. 31 555 (64. but I have the information for only 48813 household regarding the use of fair price shops (PDS). In absolute term the upper expenditure quintals (fourth and ﬁfth) are those that receive the higher ﬁscal transfer.9% and 36.and. Hence the poor deﬁned by the oﬃcial poverty line use the PDS in the same proportion than the average. Not surprisingly the share of PDS consumption over total quantities and expenditure is higher for the bottom quintal of the expenditure distribution and 10 A complete analysis will consider both the rural and urban household and also the impact of PDS before 1997 where the provision where universal. Poorer expenditure quintal household used more intensively the PDS (table1). however as regard to the oﬃcial poverty line the BPL household used just slightly more intensively the PDS than APL household respectively 37. hence any welfare analysis of PDS should consider the impact of PDS in the consumption of foodgrains (rice and wheat). I use consumption data. While it has been claimed against the PDS that it is urban biased. serious measures have been taken to improve the density and the food provision of fair price shops in rural areas. because it constitutes the most important part of the indian nutritional absorbing.%) did. This will allow to assess the beneﬁt of the Targeted Public Distribution system compared to the universal public distribution system.
Applying a similar methodology Radhakrishna and al.2 Propensity score matching estimates Table 3 presents the logit regression used to estimate the propensity score on the basis of which the matching is subsequently done11 . The qualitative comparison regarding PDS consumption. If one adopt a ﬁscal incidence beneﬁt strategy as described earlier than this information is suﬃcient. found using the 1986-1987 survey that subsidies has reduced poverty by 1.1 Results and Interpretation: The beneﬁt incidence estimate Using the method described earlier I estimate the impact of PDS on poverty (table 2). I did the test on 10 spells of equal size of propensity score. Turning to the extend of poverty the gain is also low. poor household are slightly closer to the poverty line. Albeit statistically signiﬁcative. share in total expenditure and ﬁscal transfers does not change when I compare BPL household and APL household. hence inequality among the poor has slightly decreased. 5.77 percent of decrease in poverty due to the ﬁscal transfer through PDS. The logit results The test of the balancing property has been done by cheking whether there are systematic diﬀerences in distribution of charecteristics X. Using both measures of poverty I ﬁnd that there are slightly 0. 5 5. 11 20 . The amount of transfer allows to determine the poverty relief attributable to PDS. this is a very deceptive result given the assumed cost of the system (Dumali and al 2000). The test was accepted.the ﬁscal transfer represent a greater share of their total expenditure.71 percentage point in rural areas which is larger than what I get.
This may be due to low density of geographical of fair price shops in isolated area. increasing the transaction cost12 . but the greater is the land owned the lower is the probability to use PDS. as measures by the poverty status regarding the poverty line. TPDS users are poorer. but also when considering proxy for permanent income as ”non food item” and wealth dummy proxies ”TV freezer bicycle motocycle car ”.on PDS accord well with expectations from simple averages. Land owners are more likely to use PDS. Proxies indicated the infrastructure and the degree of remoteness are also signiﬁcant. An interesting result is that beneﬁting from other government public assistance targeted to the poor as Integrated Rural Development Program or public works and having access to PDS are complement. Villages having a unique identiﬁer I look forward to ﬁnd village level information to control in part for non random placement 21 . For a ﬁrst approach and for computational convenience I present here 12 A limitation of the NSS survey for the present application is its lack of village level data. the more remote is a village and the poorer the infrastructure are the less likely are people to use the PDS. this is probably due to the fact that they are probably richer. Family size increases the access to PDS. This also raises concern about the random placement of PDS. more educated householder are less likely to use TPDS. These result are interesting in the line of improving targeting of PDS to the poor. However receiving income from other activities decreases the probability to use PDS. The impact of education here is in sharp contrast to what is observed in program whose impact is on health or income. and indirectly this improve targeting of PDS to the poor (Ravaillon1991). The cited programs are design such as the poor are more likely to self select within the programs.
I will investigate other matching strategy after havint set the general framework of the study. Table 4 present the ”with” and ”without” PDS food share. PDS user increased their propensity to consume. After matching on common support the diﬀerence is negligible 0.54. If one rupee of ﬁscal transfer is translated more than proportionately than the food share before the treatment then there are a multiplier eﬀect of PDS subsidies on food security. 22 .44%. It shows that those using PDS increase their share of food expenditure in total expenditure. Prior to matching the PS for the treated is 0. Without PDS the food share is 62. mainly because of sample size and computational convenience.24 for the control. How much is the food transfer contributing to food security? If one rupee of ﬁscal transfer is translated in one rupee of food subsidy then one can state that food security targeting conditional on access is 100%. That is controlling for PDS selection on observable by the match control group. I choose the 5 nearest neighborhood.373 and 0.33% with PDS. This appears as a by-product beneﬁt of PDS that is not taken into account in previous analysis of beneﬁt incidence.the matching based on the ”ﬁve nearest” neighborhood rather than the non parametric estimate based on kernel weighting of all possible control13 . From our initial sample I loose 244 observations due to the common support restriction.and 0. Due to 13 There are also other matching method. Constraining the match to common support reduces the gap between the control and treated propensity score.33% of total expenditure and it is 66. The mean impact on food share of PDS user is 3.368 ﬁg 1 and ﬁg2 display the propensity score for the control and the treated as well for the BPL household and APL household.
and ∆y food subsidies then the mean impact on food consumption is X ∗ ∆w + w∆y . food subsidies through PDS is a strong mechanism for increasing food security. households increase their total quantity. Indeed the mean impact of food share is highly income regressive.the fact that prices are lower this a quantity eﬀect. hence for the poorest ﬁscal subsidies accruing through PDS are directed to greater food security more than proportionately.1%.7%. the second quintal by 5. What are the mean impact on food consumption attributable to PDS? This can be decomposed on impact due to PDS independently of transfers and impact due to PDS through the subsidies. If I note X expenditure per capita prior to PDS. the last term is the food impact of subsidies. income eﬀect goes in the same direction than substitution eﬀect toward increasing consumption in absolute and relative term. Table 5 report the mean impact eﬀect of PDS on food consumption. Food subsidies going through PDS have ampliﬁcation impact on food consumption. The poorest PDS user increased their food share by 7. the increase in food consumption attributable to the program represent 10% of total expenditure. 23 . For the upper quintal of expenditure distribution.1% and the third by 2. While the ﬁscal transfer represent 5% of expenditure of the poor. the impact is the largest for the two bottom quintal and surprisingly it is even greater than the transfer. Evaluating the mean impact by expenditure quintal prior to the ﬁscal transfer one can estimate whether impact are income progressive or regressive. hence conditional on access. ∆w. food subsidies are spend on other non food item since using PDS decrease their expenditure share. mean impact of PDS on food share expenditure w.
and does not oﬀer an attractive alternative even for the rich. 5. Following the strategy of section 2. The private system is not working properly in part due to the existence of PDS. This food equivalent poverty line will be deﬂated to reﬂect the fact that poorest household spend a greater share of their income in food. this forms the baseline using the food equivalent poverty lines.3 From food security to ”oﬃcial poverty” How can I construct poverty line that translate the estimation on food share impact into poverty ﬁgures. The diﬀerence between the baseline without PDS and with PDS reﬂect the way that poverty measurement can incorporate the food security improvement brought by TPDS14 . When asked to the non user why have they not used PDS the single most answer response is ”the commodity were not available”. It may be the case that those who use PDS buy large amount to lower the transaction cost per kilo. From that and from the mean share expenditure quintal or decile I can estimate a food equivalent poverty line. I estimate the HCR ”without” PDS. Poverty line is constructed as the minimum income needed to consume 2400 calorie. This may create crowding out eﬀect of PDS users on non users. for the presentation in Palma 24 .How can I interpret these results? This has to be interpreted at the light of the frequent shortage of food in India. I estimate a new HCR based on deﬂated food equivalent poverty lines. 14 I will try to generate the poverty rates. This can conﬁrm the crowding out eﬀect.
these poverty lines may change (decreases) if the foodshare of total expenditure increases. The more striking results are that the beneﬁt of the food subsidy accrued to the poor generate more food expenditure than the subsidy. that I called ”food equivalent poverty lines”. For that purpose I have used new poverty lines. Failure to take into account the counterfactual has characterized previous evaluation of PDS. much work remains to be done. The other aspect of the work is to have estimated an Engel-like demand curve non parametrically by using PSM. while it may be true that PDS has a poor records on reaching the poor. I have adopted a positive approach that take as given the objective of food security and I chow to what respect recent trend in indian poverty measure reﬂect the movement toward greater food security. since even with no subsidies the poor beneﬁt from the PDS while the rich no.6 Conclusion This paper illuminate some concerns of immediate relevance to policy reform in the context of food security in India. work should be done on access and on determining self-selection independent of price subsidies. However. I also found that failure to take into account the change in the food content of poverty lines may underestimate the beneﬁt of PDS. through a multiplier eﬀect. Far from the controversy about measuring poverty in India. From a policy point I view. 25 . the program objective of increasing food security is eﬀective. If one want to reform the PDS. once they have access to PDS. the urgency seems to control for village characteristics in order to limit the bias due to non random placement.
(1991). Rajeev H.. Dev. A. H. 64: 605-654. Geetha. Ichimura. and Sadek Wahba. Todd. Mass. M. NBER Working Paper 6929. ”Is PDS Urban-Biased and Pro-Rich?. J. Vol. Washington DC: World Bank.References Atkinson. An evaluation”. and M. Mahendra and Suryanarayana. Economic and Political Weekly. 41. 26. Economic and Political Weekly.. No.H. 1997. S. Cambridge. No. 1987. ”The Analysis of Householf Surveys: A Microeconometric Approach to Development Policy”.2000 Dehejia.. ”Revamping PDS: Some Issues and Implications”. Deaton. ”Report of the Expenditure Reforms Commission” Heckman. ”Propensity Score Matching Methods for Non Experimental Causal Studies”. Deaton. 26 .H. and P. 1998. 41. Suryanarayana 1993. ”Matching as an Econometric Evaluation Estimator I: Evidence from Evaluating a Job training Program”. Vol. Econometrica 55: 749-64. Augus 1999 Deaton Augus and Tarzonni. Augus 1997. ”On the Measurement of Poverty”. Review of Economic Studies. Government of India (2000).. 28..
Peter and M. ”Alternative Methods of Evaluating the Impact of Interventions: An Overview”. 3. 1998. Mooji. R. Vol.. ”India’s PDS: A National and International Perspective”. E. J. 1998. Development Research Group. P. Washington DC: World Bank. 1986. Ravaillon. Rubin. Ravi (1997). Holland. ”Reaching the Rural Poor through Public Employment: Arguments. Review of Economic Studies. ”Characterizing selection Bias using Experimental data”.Heckman. ”Beneﬁt Incidence and the Timing of Program Capture”. Journal of the American Statistical Association. 1994 ”Public Distribution System as Safety Net: Who is Saved?”. Journal of Econometrics. 65: 261-694. Subbarao with S. Lanjouw. World Bank Research Observer 6:153-75. Radhakrishna. Ichimura. 29. ”The Central Role of the Propensity Score in Observational Studies for Causal Eﬀects. 380. ”Statistics and Causal Inference”.” Biometrica. H. 70: 27 . J. ”Matching as an Econometric Evaluation Estimator II:”. J. Evidence and Lessons from South Asia”. 1983. No. 30: 239—67. and K. Heckman. J. 81:945-960. Econometrica. and R. Washington DC: World Bank. 66: 1017-1099. H. 1997. Economic and Political Weekly. Robb. Rosenbaum. 1991. Martin. and P.. Ravaillon. Indrakant and C. Heckman. Todd. and P. 1985. Paul W. Ichimura. and D. World Bank Discussion Paper No. Todd..
28 .” American Statistician. a World Bank Country Study. Washington DC: World Bank. ”Toward Greater Food Security for India’s Poor: Balancing Government Intervention and Private Competition”.41-55 Rosenbaum. 25: 321-335 World Bank 1997. ”India Achievement and Challenges in Reducing Poverty: A World Bank Country Study”. World Bank 1998. Washington DC: World Bank. 1985. Agricultural Economics. 39: 35-39 Umali-Deininger. ”Reducing Poverty in India: Options for more eﬀective Public Services”. Dina and Klaus Deininger 2001. Rubin. and D. ”Constructing a Control Group using Multivariate Matched Methods that Incorporate the Propensity Score. P.
231 5.038 0.003 Total 0.392 0.001 Third 0.932 8.057 12.361 0.916 0.181 0.028 0.381 3.62 3.213 5.753 0.048 15.346 0.473 169.712 0.366 0.05 0.258 11.032 15.673 4.307 0.049 130.439 0.Table1: Selected statistics on gains and consumption from PDS Expenditure Quintile subsidy for proportion subsidies per kg of of PDS user per kg of rice wheat 0.185 10.101 5.226 0.785 0.13 0.13 0.374 4.509 6.002 Source: Author calculation from NSS55 .452 0.079 0.04 16.379 0.548 13.034 0.103 0.518 194.083 124.191 5.602 11.128 0.232 5.039 0.033 0.14 0.074 % transfer over total expenditure 0.703 10.773 6.477 4.822 3.051 0.681 247.539 0.139 0.248 % of PDS consumption over Income total foodgrain transfer consumption 0.792 7.567 6.655 0.101 0.803 427.053 15.018 0 0.813 Second 0.238 5.776 11.057 14.251 11.001 Fourth 0.002 Poorest 5.235 5.808 6.768 313.861 0.63 3.001 Fifth Above poverty line 0.054 14.118 0.779 7.176 0.701 216.258 0.001 Below poverty line 0.229 3.226 5.802 25.7 0.13 0.71 6.
041 0.005 0.044 0.011 0.015 0.122 0.000 0.014 0.008 0.060 0.043 0.020 0.132 0.003 Andra Pradesh Assam Bihar Gujarat Haryana Kartanaka Kerala Madhya Pradesh Maharastra Orissa Punjab Rajsathan Tamil Nuda Utar Pradesh West Bengal Himachal Pradesh 0.403 0.001 0.081 0.002 0.064 0.065 0.002 0.004 0.014 0.002 0.012 0.021 0.226 0.316 0.105 0.006 0.27 0.007 0 0.326 0.017 0.077 0.029 0.023 0 0 0.06 0.021 0.471 0.090 0.088 0.374 0.082 0.078 0.003 0.052 Notes: mean diifferences are statistically signifiacative at 5% (t-test) except for Rajsathan and Himachal Pradesh Source: author calculation from NSS55 .076 0.061 0.023 0.008 0.003 0.055 Average impact on PGI 0.079 poverty rate Average impact on HCR poverty gap Poverty "without TPDS" ("without"-"with") Gap with PDS 0.010 0.444 0.135 0.000 0.001 0.135 0.322 0.004 0.111 0.01 0 0.278 0.199 0.089 0.026 0.010 0.093 0.000 0.319 0.494 0.011 Total 0.021 0.008 0.06 0.077 0.242 0.Table 2 Impact of PDS using the fiscal benefit method state Poverty rate "with TPDS" 0.181 0.017 0.003 0.000 0.037 0.047 0.413 0.021 0.126 0.125 0.444 0.164 0.004 0.002 Average normalised Average normalised poverty gap Poverty Gap without PDS 0.234 0.088 0.003 0.378 0.008 0.
19 during the last 365 days.32 -6.04121 0.54 Logit regression for access to public Distribution System (continued) Coefficient t-statistic number of meals taken per day per capita -0.00031 0.86 4.85 others 0.51 remittances 0.00578 -0.09 6.28 on payment 0.71 -1.00130 -1.00746 0.09700 1.Logit regression for access to public Distribution System Coefficient xnonfood whether the household is poor houehold head age whether the household head is a male household head education whether the household owns a radio whether the household owns a TV whether the household owns a sewmach whether the household owns a freezer whether the household owns a bicycle whether the household owns a motocy whether the household owns a car whether the household owns is a land owner land surface owned The houshold size primary source of cooking is firewood primary source of lighting is electrecity whether the household owns a kitchengarden did the household receive any ressource from IRDP did any member of the hh work for at least 60 days on public work the last 365 days -0.11 -15.75 fishing/other agricultural entreprise 0.08041 -2.6 interest and dividends -0.33796 0.25606 0.33 -6.23604 -0.78 .25920 -2.26 -0.48397 -0.76 5.39416 0.91 others -0.72 -8.00135 -0.03646 0.39463 13.09288 -0.19 number of meals taken this last 30 days away from home free at cost number of meals taken last in school by child 0.32 from employer as perquisites or part of wage 0.72 5.15783 -0.71 11.25492 -0.64 non-agricultural enterprises 0.17604 -0.5 5.87 0.00260 1.00212 2.24009 0.12538 2.25263 -3.06909 1. did the hh receive any income from: cultivation -0.04056 -0.38935 5.57 rent -0.00801 4.76 3.16 wage salaried employment 0.2 5.00574 1.11133 3.72 -0.03354 -0.6 at home 0.75 -3.33 pension 0.30319 t-statistic -4.42 -8.63 -0.20982 6.04996 -2.
04097 -21033.67581 -1.15833 0.01 -18.93 .14669 -3.16065 -0.12927 -1.household head religion: Hinduism Christian Islam household head social group scheduled cast scheduled tribe other backward class Type of income received during last 365 days (omitted modality is economic actvity): other sources no income _Istate_2 _Istate_3 _Istate_4 _Istate_5 _Istate_6 _Istate_7 _Istate_8 _Istate_9 _Istate_10 _Istate_11 _Istate_12 _Istate_13 _Istate_14 _Istate_15 _Istate_18 _cons Log-likelihood function Number of observations 0.28464 -0.84652 -0.58112 -1.75 -31.97 -0.03 1.10369 -0.56 -2.71106 0.91 -1.37915 0.02013 0.21 -31.28 -20.41 -3.18 -8.77 -1.08052 -0.47201 -1.89537 -0.73374 -4.07771 0.51 -22.57 -44.73 10.63 -2.67 9.06414 0.47 44517 -2.85 -30.78 5.72264 0.46 -43.61343 -2.57266 -2.98264 -2.1 -0.86 -12.17 4.97728 -0.73 2.
0e-13 Probability of using TPDS .983636 Figure 1: Propensity score for household not using TPDS .000377 Probability of using TPDS .Propensity score for household using TPDS .173092 Fraction 0 1.966506 Figure 2: 28 .10171 Fraction 0 .
063 -0.01 0.02 0.051 0.142 0.075 0.175 -0.057 -0.082 -0.016 0.009 -0.146 -0.023 0.038 0 0.021 0.13 0.073 -0.001 -0.034 All India 0.028 0.036 0.1 -0.001 0.023 0.134 -0.004 -0.015 -0.032 0.104 0.091 0.032 -0.foodshare without PDS) by state and expenditure quintile states Poorest Second Third Fourth Fifth All India Andra Pradesh Assam Bihar Gujarat Haryana Kartanaka Kerala Madhya Pradesh Maharastra Orissa Punjab Rajsathan Tamil Nuda Utar Pradesh West Bengal Himachal Pradesh 0.107 0.015 -0.12 0.051 0.02 -0.065 0.053 -0.083 0.032 -0.021 0.02 0.147 -0.104 0.127 0.112 -0.075 0.024 0.029 -0.098 -0.016 0.008 0.022 0.045 -0.058 -0.008 0.033 0.061 0.032 -0.009 0.024 0.Table4: Distribution of mean impacts (foodshare with PDS .029 0.076 0.068 0.05 -0.011 -0.117 0.071 Source: author calculation from NSS55 .038 -0.098 0.066 0.003 -0.027 0.016 0.098 0.017 -0.045 0.002 0.071 -0.015 0.087 -0.016 0.011 0.082 0.022 0.12 0.177 -0.014 0.019 -0.117 0.077 -0.084 -0.008 0.055 0.036 -0.017 -0.003 -0.046 0.021 0.032 0.
783 -6.208 6.672 -315.912 Total 27.093 34.865 -25.391 13.768 44.091 -69.391 11.154 -11.971 -154.646 16.727 3.554 50.Table 5: means Impact on food consumption: the average increase in food consumption for PDS user due to PDS state Poorest Second Third Fourth Andra Pradesh Assam Bihar Gujarat Haryana Kartanaka Kerala Madhya Pradesh Maharastra Orissa Punjab Rajsathan Tamil Nuda Utar Pradesh West Bengal Himachal Pradesh 40.165 -114.27 29.406 -17.735 -89.526 -66.737 -5.76 -5.015 -3.545 -2.157 -27.443 51.482 23.921 12.288 58.943 5.202 -6.998 -87.535 39.105 49.837 54.135 -237.421 -39.02 -41.673 1.168 29.472 16.701 51.47 24.459 36.851 -2.836 -30.431 -62.225 112.772 13.565 44.104 -98.71 22.943 3.243 14.682 Notes: Sample size problem may explain the huge negative impact on the 5th quintile Source:author calculation from NSS55 .982 28.44 -34.508 -14.346 14.368 36.426 36.194 12.424 7.362 -37.55 13.799 17.757 35.136 28.007 2.432 14.962 7.905 8.612 -17.59 4.238 6.819 -172.856 -31.59 22.279 -23.123 20.766 9.475 16.25 49.198 28.335 7.681 34.876 16.927 38.421 Fifth -44.844 33.156 48.797 45.828 45.668 47.709 43.117 Total 34.348 29.675 21.49 48.599 0.749 14.
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