ANALYSIS OF HOUSEHOLD FOOD INSECURITY AND THE IMPLICATION OF MEASUREMENT ERROR, MANDERA COUNTY, KENYA MWENJERI G WAITHAKA. (BSC, MSC) A99/22787/2011 A Research Thesis Report Submitted In Fulfillment of the Requirement for the Degree of Doctor of Philosophy in Agricultural Economics, Kenyatta University April 2015 ii DECLARATION This thesis report is my original work and has not been presented for a degree in any other university. Signature…………………………………………Date……………………………….. Mwenjeri Gabriel Waithaka (A99/22878/2011) Department of agribusiness management and trade Kenyatta University SUPERVISORS We confirm that the work reported in this thesis was carried out by the candidate under our supervision and has been submitted with our approval as the university supervisors. Signature…………………………………………Date……………………………….. Prof. Bernard Njehia Department of agribusiness management and trade Kenyatta University, Nairobi Signature…………………………………………Date……………………………….. Prof. Samuel Mwakubo Department of agricultural Economics and Resource Management Moi University, Eldoret iii DEDICATION To my parents Mr. John Mwenjeri and Mrs. Margaret Wanjiru who planted me firmly on this path. iv ACKNOWLEDGEMENTS Even though the PhD. corridor is a solo march; I have benefited enormously from the guidance and support of several people along the way. I am especially indebted to the 325 respondents who willingly and freely gave me their time and needed information. Special thanks to my field assistants, Halkano Jarso, Charles Mwangi and the rest of the team for their selfless effort during the process of data collection. I wish to acknowledge with gratitude the guidance of my University supervisors, Prof Bernard Njehia, Department of Agribusiness management and Trade, Kenyatta University and Prof. Samuel Mwakubo of Moi University, Department of Economics and Agricultural Resource Management. I also wish to acknowledge my wife Safia, children Philip, James and Frances whom without their love, patience and understanding, I would never have come this far. Thank you for your continued support. Special thanks to my parents Mr John Mwenjeri and Mrs Margaret Wanjiru for their pecuniary support, God Bless you. v TABLE OF CONTENTS Title page i Declaration ii Dedication iii Acknowledgements iv Table of contents v List of Tables viii List of Text Boxes ix List of Figures x List of Appendices xi Abbreviations xii Abstract xiii Chapter 1: Introduction 1 1.0 Preamble 1 1.1. Background Information 1 1.2 Problem Statement 6 1.3 General Objectives 7 1.4 Specific Objectives 7 1.5 Hypothesis 7 1.6 Significance of the study 8 1.7 Study Area 9 Chapter 2: Literature review 11 2.0 Introduction 11 2.1 Concept of food insecurity measurement 11 2.2 Estimation of consumer demand and household expenditure 13 2.3 Empirical measurement of food insecurity 16 2.4 Research Gaps 20 Chapter 3: Methodology 22 3.0 Introduction 22 3.1 Conceptual Framework 22 vi 3.2 Theoretical Framework 25 3.3 Instrumental variable in General Method of Moments (IV-GMM) 28 3.4 Cost of Basic Needs Method (CBN) 32 3.4.1 Surplus/Shortfall Index 33 3.4.2 Adult equivalent factors 34 3.5 Food insecurity depth analysis 35 3.6 Data collection 36 3.6.1 Sampling Design and Sample size determination 36 3.6.2 Data collection methods 37 3.6.3 Data types and sources 38 3.7 Data Analysis 39 Chapter 4: Results and Discussion 41 4.0 Introduction 41 4.1 Sex of household head 42 4.2 Major sources of Food 44 4.3 Major Household Income sources 45 4.4 Food budget for households in Mandera County 46 4.5 Relationship between food share and Household expenditure – Non Parametric analysis 48 4.6 Food insecurity Levels for Mandera households 48 4.7 Food insecurity estimates with measurement error- Standard OLS regression results 52 4.8 Food insecurity measurement with corrected Measurement Error- IV-GMM Estimates 53 4.9 Measurement error in household insecurity analysis 57 4.9.1 Food insecurity gap for Households in Mandera 59 4.10 Responsiveness of the household food expenditure estimates 60 4.11 Implication to Food security Policy 62 Chapter 5: Conclusions and Policy Recommendations 69 vii 5.0 Introduction 69 5.1 Summary of findings 69 5.2 Conclusions 71 5.3 Policy Recommendations 72 References 75 viii LIST OF TABLES Table 3.1 Adult-equivalent conversion factors 34 Table 3.2 Data Design 38 Table 4.1 Gender of the household head 41 Table 4.2 Household food sources 42 Table 4.3 Household Income sources 43 Table 4.4 Food expenditure for household in Mandera County 44 Table 4.5: Cost of Basic needs for Mandera households 48 Table 4.6 Household food insecurity indices for the Mandera County 49 Table 4.7 Food insecurity estimates with measurement error – OLS robust regression estimates 52 Table 4.8 Food insecurity estimates with corrected measurement error -IV -GMM regression estimates 54 Table 4.9 Food Insecurity Gap for Households in Mandera County 59 Table 4.10 Responsiveness of the household food expenditure estimates 61 ix LIST OF TEXT BOXES Box 1. The role of district steering committee in food insecurity assessments 4 x LIST OF FIGURES Figure 3.1 Conceptual frameworks of food access and consumption 24 Figure 4.1 Relationship between food budget and household expenditure- Non- Parametric Analysis 47 xi LIST OF APPENDICES Appendix 1: Map of Mandera County 83 Appendix 2: Questionnaire 84 xii ABBREVIATIONS AIDS Almost Ideal Demand System CBN Cost of Basic Needs FAO Food and Agriculture Organization GMM Generalised Method of Moments GoK Government of Kenya HES Household Expenditure Survey IV Instrumental variable LES Linear Expenditure System MDG Millennium Development Goals OLS Ordinary Least Squares PRSP Poverty reduction strategy paper UK United Kingdom UNICEF United Nations International Children Educational Fund US United States USAID United States of America International Development USDA United states department of Agriculture WFP World Food Programme xiii ABSTRACT The objective of this study was to analyze food insecurity, underlining the significance of accurate measurement to formulate the required policies for addressing food deprivation. The need for accurate measurement of food requirement is essential to generate adequate information to support decision making especially in areas vulnerable to food shortages and famine. Using random sampling techniques and employing Fisher’s formula, a total of 323 households were selected for the study. Informed by demand theory as articulated by Engel’s law of inverse relationship between total household income and the expenditure on food, plus adding a quadratic term in the equation, the study sought to estimate the magnitude of food insecurity in Mandera County. The cost of basic needs (CBN) method was employed to provide preliminary estimate for the households’ food expenditure level. In order to deal with the problem of measurement error econometric models including ordinary least squares and using instrumental variable in generalized method of moment (IV-GMM) techniques were applied to quantitatively analyze data on quadratic Engel curve. The study established that Mandera County experiences food deprivation of significant magnitude. The study has revealed that, observed household expenditure is not a perfect measure of the actual food insecurity situation. This is because microeconomic data are contaminated by measurement error which reduces reliability of parameters and if not addressed will result to erroneous conclusion in economic analysis. The results show negative and significant quadratic coefficients for both OLS and IV-GMM. Accordingly the results shows that for the estimator that corrects for measurement error 81% of the households are food insecure as opposed to 64%. In this study it is observed that measurement error reduces parameter reliability by 32% which leads to underestimation of food insecurity by about 17%. Among the recommendations resulting from the study include; first it is easy to underestimate the proportion of food insecure households if they are incorrectly estimated and therefore superior statistical and sampling techniques should form the basis of quantifying food insecurity to facilitate decision making process. Secondly, the study supports for policy formulation that is guided by economic limitations not only as a gauge to measure food insecurity but also to guide intervention and evaluating policies aimed at alleviating it. Lastly, to increase food availability and reduce food insecurity, sound data-based analysis anchored on statistical theory that provides inferential basis for guiding policy and program interventions in of paramount importance. 1 CHAPTER ONE: INTRODUCTION 1.0. Preamble This chapter provides background information on food insecurity analysis, highlights the analytical approaches and briefly expound on challenges on policy formulations emanating from these analysis. Section 1.2 presents the problem statement on information gaps on which this study is anchored, and the objectives guiding the study are presented in sections 1.3 and 1.4. Section 1.5 states the hypothesis of the study. Lastly, the chapter presents the significance of the study and describe the study area in sections 1.6 and 1.7 respectively. 1.1 Background Information Food insecurity continues to be a major challenge facing the world today. New determinants of food insecurity, such as capricious food price changes and climate change, are combining with previously identified namely; poverty, inequality and weak governance to expose ever-growing numbers of hungry people