The Nutritional Implications of High Wheat Prices on Agriculture Households in Pakistan

Abstract

This study analyzes the potential repercussions of high wheat prices on agriculture household economic and nutritional well-being in Pakistan. This task was accomplished by formulating a theoretical model to capture the economic behavior of agricultural households that produce marketable surpluses of wheat. For empirical verification, eight modules of nationally representative Household Integrated Economic Survey (HIES) were combined with approximate price levels to create a pooled cross-sectional sample of annual price-indices for household expenditure from 2000-01 to 2018-19. The study uses the Linear Approximate of Almost Ideal Demand System (LA-AIDS) model to derive demand elasticities and conduct a comparative static analysis. Finally, the model is extended to assess household nutritional well-being by linking price effects to calorie intake. The empirical findings demonstrated that high wheat prices resulted in high farm revenues for agricultural households. Although wheat consumption has declined, these households have used excess profits to diversify the food basket, which in turn led to an improvement in calorie intake. An indirect spillover effect from changes in wheat prices has also been observed, leading to an increase in demand for domestically produced commodities. Since the overall impact of wheat price increase on agricultural and non-agricultural households is mixed, it is proposed to pursue a careful food security policy to ensure the economic and nutritional well-being of the entire society. This study adopts a two-pronged approach of social to integrating social safety nets that does not hinder agricultural growth to achieve a mutually rewarding outcome.