How Costly is using Livestock as a Saving Device? A Note on Meat Prices during Food Shortages

Tinbergen Institute Discussion Paper 2020-021/V

46 Pages Posted: 15 May 2020 Last revised: 1 Jul 2020

See all articles by Wouter Zant

Wouter Zant

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: June 31, 2020

Abstract

We measure if and to what extent livestock sales during food shortages affect the wealth value of livestock. For this purpose we exploit monthly market prices of meat and staple foods in Malawi, for up to 72 locations (towns, villages and markets), for the period from January 1991 to December 2009. The empirical evidence is consistent with increased livestock sales during food shortages, especially small livestock, and especially in the south. Results are robust for different ways to approximate food shortages and various other threats. During food shortages, real meat prices in local markets tend to decrease up to 40%, thereby reducing the wealth value of livestock at the very moment livestock is sold on the market to purchase staple foods. Similar to staple foods, poor agricultural households systematically tend to sell low and buy high. Savings instruments to bridge food shortage periods that do not lose value when liquidated, are needed. Currently popular index insurance, if properly designed to take account of this, or well-functioning safety nets will generate large welfare gains and enhance economic growth.

Keywords: Food Security, Saving, Drought, Livestock, Subsistence Farming, Malawi, Africa

JEL Classification: D19, O16

Suggested Citation

Zant, Wouter, How Costly is using Livestock as a Saving Device? A Note on Meat Prices during Food Shortages (June 31, 2020). Tinbergen Institute Discussion Paper 2020-021/V, Available at SSRN: https://ssrn.com/abstract=3581236 or http://dx.doi.org/10.2139/ssrn.3581236

Wouter Zant (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
6
Abstract Views
176
PlumX Metrics