Food Supply and Income Distribution in a Structuralist Macro-Model

Wahiduddin Mahmud

 

Abstract

The short-run effects of changes in food availability in a low-income economy are examined by using a macro-model with two producing sectors and four household groups. The empirical analysis follows a general equilibrium approach that traces the interrelationship among prices, wages, distribution of household and factor incomes, pattern of demand, and the level of economic activity. The parameter values and the initialisation of the model are based on data on the Bangladesh economy. The results of the model demonstrate that the supply of staple foods has a strong influence on the distribution of real income and the absolute living standards of the poor. The results also suggest that the food entitlement failures in the short run arise largely due to the effect of higher food prices on real wages rather than due to direct income losses in food production.

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