Potatoes for Rice: a Preamble

Anik Ashraf, Research Associate, Economic Research Group
Supervisor: Dr. Sajjad Zohir, Director, Economic Research Group

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Comments

Posted by: Professor Wahiduddin Mahmud, Dhaka University, Bangladesh
The paper is neat and well written. It can provide the foundation for more in-depth analysis of the issue of complementarity/substitutability between rice and potato. To start with, the caloric value per taka of rice and wheat (kcl/taka) at the varying prices overtime may be easily calculated using nutrition data.

Posted by: Professor Farida C. Khan, Co-Director, Center for International Studies, University of Wisconsin-Parkside, USA
I am a little confused by this exercise. If you have household data for one period (let’s say for the period 1997-98), how does the price enter as a variable? Does it vary regionally or for each household? Or do you have monthly data on each household so that in Table 1 each period signifies panel data with both months and households?
For 1999-2000, there may be multicollinearity since the price of potato is not significant although R square is not that high?
If a household substitutes potato for rice, we are talking about cutting back on rice and increasing potato intake but still consuming the two together. Still this is a new kind of low level ‘potato famine’ that you are uncovering.

Posted by: Inam Ahmed, News Editor, The Daily Star, Bangladesh
I just had a look at the interesting article by Anik. I have a few comments on the write-up. My experience shows potato consumption is also correlated with the ebb of vegetables with the advent of monsoon and flood. Potato is consumed more and so prices go up as other vegetables are washed out by rain. The other point is, the view of the write-up overlooks the cultural dimension of rice and potato. To suggest that the poor should take more potatoes instead of rice is like asking them to settle for less, thus increasing the food inequality. Once potato price goes up because of more consumption (and rice is exported) may be we will ask the poor to settle for something even less like banana-tree-stumps. This is the global pattern now. Look at the RMG sector.

Posted by: Mashfiqur Rahman Khan, Dhaka University
First of all, hats off to Anik to initiate the whole proceedings with a nice economic research paper. While reading the paper I was wondering few things. Although it is well acknowledged that a simple econometric methodology is adopted in the study, however, I feel some concern with this methodology as the discussion is largely driven by the regression results. Firstly, as the dependent variable is in real term, the explanatory variables need to be converted into real ones using CPI. Secondly, consumption is a function of permanent income and HH total expenditure rather than its total income is regarded as its permanent income. Additionally, the measurement of expenditure is far more accurate than that of income. Thirdly, in cross sectional regression including the price variable will raise some question as raised by Farida apa. And inclusion of two correlated price variables will every likely cause some multi-collinearity problem. If you see the seasonality of the price of rice and potato, clearly demand for potato has a strong seasonal component built into it, whereas demand for rice is more stable over time. So, the sample period chosen has got some implication on the demand for potato. One way to get out of this problem seems to me is estimating the demand for rice. Now, having done all the exercise the bottom line is that the potato price needs to be stabilized throughout the year to ensure food security. However, it is uncertain that stabilization of potato price will do the job as the cross elasticity is not very high in magnitude in the backdrop of low current level of consumption of potato. One way to strengthen this policy option is by getting a large cross elasticity of calorie substitution.

Posted by: Dr. Sajjad Zohir, Economic Research Group
In response to Wahiduddin Mahmud’s remark Rushad Faridi provided the following information in the ERG meeting on 30th March: 100 gm potato has 93 KCal, 100 gm rice has 350 KCal. Thus, as long as the price of rice is less than 3.5 times the price of potato, calorie per Taka will be more from rice! Currently, it is little more than 2 times.

Posted by: Parves Shonchoy, Associate Lecturer, University of New South Wales, Australia
The work done by Mr. Anik is indeed a praiseworthy work. But I have some questions regarding the modeling and the practice done in the paper.
1. In the equation, HHS Adult equivalent household size calculated as HHS 0 (Mage<2yrs) + 0.5(M2≤age<10) + 1 (M10>age) where M is the number of household members in the given age range. My question is what is the justification for this equation? Why a person from age 2 to 10 will be given the weight of .5 in the equation? Is it based on Consumption? If yes then why we will treat the consumption of a 25 year\’s adult equal with a 65 years old adult?
2. There is no control for Gender in the model
3. How we have calculated the income quartile? What are the cutoff points?
4. What are the post estimations/diagnostics used to test that the regression is correct? I seriously think that the regression is infected with omitted variable which will create a biased and inconsistent estimates of the coefficients. Also there is multi-collinearity problem. One way to deal with this problem could be the Instrument variable approach.
5. Why the income used as a non-logarithmic form in the regression?
6. There is no control of seasonality, Market condition and inflation. Hopefully by putting more effort we can answer these questions and can proceed forward with this very interesting research.