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The Growth of Poor Children in China 1991-2000:Why Food Subsidies May Matter

Lars Osberg Jiaping Shao Kuan Xu

Economics DepartmentDalhousie University

UNU-WIDER Conference Advancing Health Equity 29-30 September 2006

Helsinki, Finland

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The paper in one slide China – 1991 – 2000

Rapid growth in inequality & average income Increased Average Height-for-Age children 2-13 Elimination of food subsidies after 1995 Little increase in height of disadvantaged kids

Does income poverty now matter more for child development in China? Robust OLS & quantile regressions on panel data Poverty status & growth in height-for-age

Not significant in 1991-1993 Significant negative impact 1997-2000

General moral: Food subsidization may play an important social protection role for child well-being and development

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China Health and Nutrition Survey (CHNS)

Micro-data collected in 1989, 1991, 1993, 1997 and 2000

Surveys conducted by the Carolina Population Center at the University of North Carolina

Follows a panel of about 16,000 individuals in 4,400 households in 9 provinces

Incredible level of detail 1991 – 2000 data used Children aged 2 to 13

<2 – variable height + measurement error >13 – variability due to puberty onset

documentation available at http://www.cpc.unc.edu/china

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Survey Provinces

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Context: Very Rapid Growth in GDP Per Capita & Inequality in China

GDP per capita in China 1980 =$763 2004 = $5,419

1991-2000 annual real growth rate of per capita GDP = 9.2 % 1991 = $ 1,721 2000 = $ 3,928

World Bank GDP per capita, PPP (constant 2000 international $)

2006 = 10.9% GDP growth

Gini index of inequality in money incomes China

0.345 in 1991 0.407 in 2000.

Canada 0.281 to 0.302

USA 0.338 to 0.368

Netherlands 0.266 to 0.248

Switzerland 0.309 to 0.280

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Overall Income Distribution Shifts Up – Lower Tail Stays

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Issue: Well-Being & Growth ??

Rising Inequality in Cash Income in China + Money Matters More

Social Policy Changes Marketization Elimination of food subsidies Loss of employment guarantees Loss of health care coverage

Are the poor absolutely worse off? Meng, Gregory and Wang (2005)

Does poverty affect health of poor kids?

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HAZi =

(height child i – median height same sex & age)(standard deviation of height - same age & sex)

“good indicator underlying health status” slow height growth correlates with:

perform less well in school score poorly on tests of cognitive function poorer psychomotor skills & fine motor skills lower activity levels interact less frequently in their environments fail to acquire skills at normal rates Mansuri (2006:3)

HAZi < -2 = “stunted”

HAZi < -3 = “severely malnourished”

Indicator of most basic of Sen’s “Capabilities” to attain normal physical & cognitive development

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Chinese Children are taller on average- Height as % of CDC Norm Age 2 -18

0. 92

0. 93

0. 94

0. 95

0. 96

0. 97

0. 98

0. 99

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24 48 72 96 120 144 168 192 216Age i n Month

Mal e19912000

0. 92

0. 93

0. 94

0. 95

0. 96

0. 97

0. 98

0. 99

1

24 48 72 96 120 144 168 192 216

Age i n Month

Femal e19912000

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Change of average height-for-age (HAZ) by decile 1991 to 2000 (age 2-13)

Decile Average HAZ1991

Average HAZ2000

AbsoluteChange

PercentageChange

1 -3.39 -3.22 0.16 4.8 %

2 -2.51 -2.09 0.42 16.8 %

3 -2.12 -1.58 0.53 25.1 %

4 -1.80 -1.25 0.55 30.7 %

5 -1.50 -0.95 0.55 36.8 %

6 -1.19 -0.62 0.56 47.5 %

7 -0.87 -0.34 0.53 60.6 %

8 -0.52 0.01 0.53 101.3 %

9 -0.13 0.45 0.58 439.8 %

10 0.80 1.30 0.50 62.1 %

N 2766 1735

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Stagnation in % children who are “Severely Malnourished” [HAZi < -3] ?

HAZi < -3 HAZi < -2

1991 7.23% 28.49%

1993 6.27% 24.86%

1997 3.94% 19.71%

2000 4.27% 16.43%

[1991: n=1659; 1993: n=1390;1997:n=1123; 2000:n=813]

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Income Growth + Social Policy Reform

Rapid growth in GDP in China accompanied by structural reforms Employment security Housing Food subsidies

Relatively more important for low income households “Even though income growth reduces poverty,

the radical reform measures implemented in the 1990s have sufficiently offset this gain that urban poverty is higher in 2000 than in 1986.”

Meng, Gregory and Wang (2005)

Social Protection in 1991 and 2000

1991 2000

Individual %1 Mean2 % Mean

health subsidy rec'd last year 8.18% 105.72 #

Bath/haircut subsidy rec'd last year 23.41% 78.93 #

Book/newspaper subsidy rec'd last year

12.60% 85.74 #

House subsidy rec'd last year 2.02% 116.14 #

Other nonfood subsidy last year 15.48% 264.25 #

Meat/veg/oil subsidy rec'd last year 30.80% 144.94 #

Does person have health insurance? 27.77% 19.94%

Annual insurance premium 2.87 77.55

Household

Average value of ration coupon last year

422.77 #

Value of Food Coupons, 1991[$2 PPPpoverty line = 1072 Yuan; ½ Median = 597 Yuan]

Item% 1

Average annual

amount 2

Average market value per coupon

(Yuan)

Total coupon value

(Yuan)

Rice 86.34% 690.32 0.43 296.84

Wheat Flour 71.28% 512.5 0.32 164

Other cereal grains 27.15% 334.9 0.24 80.38

Cooking oil 81.05% 32.36 2.53 81.87

Eggs 2.67% 25.98 1.63 42.35

Pork (or other meat) 9.59% 67.04 2.93 196.43

Chicken 0.29% 20 n/a n/a

Sugar 3.60% 29.34 1.83 53.69

Other 4.30% 1185.74 0.78 924.88

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Does income poverty now matter more for child development in China? Loss of food subsidy has removed buffer

to impact of income shocks

China – special factors “One child” policy means family resources are

concentrated Very rapid growth in most people’s incomes

HAZi reflects accumulation of all past health & nutrition Including any long-ago food subsidies

∆ HAZi – is current growth influenced by current income shocks ?

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Variables 1991-2000

Dependent variable HAZ_2000

HAZ_initial year 0.472*** (0.132)

Father weight (kg)_initial year 0.012 (0.008)

Father height (cm) _initial year 0.018 (0.020)

Father age at child’s birth 0.013 (0.027)

Father # of yrs formal education_initial year -0.053*** (0.018)

Mother weight (kg) _initial year 0.023** (0.011)

Mother height (cm) _initial year 0.029* (0.015)

Mother age at child’s birth -0.026 (0.089)

Mother age at child’s birth squared 0.000 (0.001)

Mother # of yrs formal education initial year 0.063*** (0.017)

Change of number of household members -0.101 (0.087)

Log of total equivalent income in the period -0.130 (0.169)

Dummy=1 if income <$2 / day_91 0.156 (0.129)

Dummy=1 if income <$2 / day _93 0.410*** (0.128)

Dummy=1 if income <$2 / day_97 -0.603*** (0.148)

Dummy=1 if income <$2 / day _2000 -0.794*** (0.134)

Panel OLS 1991-2000; 2-4 become 11-13Poverty line=$2 / day ; very small sample

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Estimates from panel – Robust OLS – Early and late 1990s compared

Poverty line = $2 / day / per capita Controls for tap water, region

Larger sample 2 to 11 in 1991 were 4 to 13 in 1993 2 to 10 in 1997 were 5 to 13 in 2000

Poverty status insignificant in 1991 & 1993 Statistically significant & negative in 1997 &

2000 Same results if ½ median poverty line

Either national median or rural/urban separately

Variables 1991-1993 1997-2000

Dependent variable HAZ_1993 HAZ_2000

HAZ initial year 0.711*** (0.042) 0.537*** (0.041)

Father weight (kg) 0.001 (0.003) 0.016*** (0.005)

Father height(cm) 0.010** (0.005) 0.003 (0.007)

Father age at child’s birth 0.009 (0.009) 0.005 (0.013)

Father education 0.015 (0.010) -0.005 (0.013)

Mother weight(kg) 0.007* (0.004) 0.008* (0.004)

Mother height (cm) 0.003 (0.006) 0.019*** (0.007)

Mother age at childbirth 0.013 (0.037) 0.112** (0.048)

Mother age squared 0.000 (0.001) -0.002*** (0.001)

Mother education -0.005 (0.009) 0.020* (0.010)

Change number in hhold 0.023 (0.046) -0.033** (0.016)

Log total equiv income 0.027 (0.046) -0.087 (0.061)

income <$2 / day_91 -0.029 (0.066)

income <$2 / day _93 0.069 (0.083)

income <$2 / day_97 -0.193** (0.098)

income <$2 / day _2000 -0.153* (0.082)

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OLS – presumes common impact of RHS variables on conditional mean OLS – choose β to minimize sum squared

residuals Implies: outliers acquire greatest weight Presumes: symmetric loss function for errors

Social important issue – stunting & deprivation Child growth & development – arguably a different

process for the stunted & for the thriving

Quantile regression Estimates the differing determinants of outcomes

at each point in the outcome distribution Linear, asymmetric loss function

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Panel 1991-93 – Robust OLS & Quantile Regression Estimated Impact of Poverty on HAZi

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0 20 40 60 80 100Quanti le

Poverty1991

Quanti l e point estimates95% pointwi se confi dence bandOLS estimate95% confi dence i nterval for OLS estimate

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0 20 40 60 80 100Quanti le

Poverty1993

Quanti l e point estimates95% pointwi se confi dence bandOLS estimate95% confi dence i nterval for OLS estimate

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Panel 1997-2000 – Robust OLS & Quantile Regression Estimated Impact of Poverty on HAZi

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0 20 40 60 80 100Quanti le

Poverty1997

Quanti l e point estimates95% pointwi se confi dence bandOLS estimate95% confi dence i nterval for OLS estimate

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0 20 40 60 80 100Quanti le

Poverty2000

Quanti l e point estimates95% pointwi se confi dence bandOLS estimate95% confi dence i nterval for OLS estimate

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Quantile Regression Estimates

1991 & 1993 quantile point estimates vary relatively little

& close to OLS estimates - i.e. β = 0 nothing gained by using quantile regression

1997 fairly close to OLS β = -0.2 (≠0 @ 95%)

2000 Increasingly large negative impact of

poverty for larger HAZ Poverty especially reduces the chances of

substantial growth

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Caveats

China = 1.3 Billion people HUGE diversity of circumstances

CHNS data – very fine BUT Great Audacity would be required to generalize

from 4,400 households in 9 provinces Sample selection implies much smaller sample size for

regressions reported here N = 1278, 587, 129

Simplest poverty measure used + 3 alternative poverty lines

Suggestive results NOT conclusive evidence– to be corroborated with larger data sets ??

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Possible Implications Bottom decile of children aged 2-13 in

China ≈ 13 million Failure to keep up with increase in stature

of other children matters1: For future output, health & well-being2: Because children are citizens NOW

General Moral? Subsidies to basic food availability may play

a crucial safety net role for child well-being Historically important in OECD nations Worth considering in Social Policy Reform in

LDCs