Anthony J. Venables
Economic activity is unevenly distributed across space, both internationally and within countries. What determines this spatial distribution, and how is it shaped by trade? Classical trade theory gives the insights of comparative advantage and gains from trade but is firmly aspatial, modeling countries as points and trade (in goods and factors of production) as either perfectly frictionless or impossible. Modern theory places this in a spatial context in which geographical considerations influence the volume of trade between places. Gravity models tell us that distance is important, with each doubling of distance between places halving the volume of trade. Modeling the location decisions of firms gives a theory of location of activity based on factor costs (as in classical theory) and also on proximity to markets, proximity to suppliers, and the extent of competition in each market. It follows from this that—if there is a high degree of mobility—firms and economic activity as a whole may tend to cluster, providing an explanation of observed spatial unevenness. In some circumstances falling trade barriers may trigger the deindustrialization of some areas as activity clusters in fewer places. In other circumstances falling barriers may enable activity to spread out, reducing inequalities within and between countries. Research over the past several decades has established the mechanisms that cause these changes and placed them in full general equilibrium models of the economy. Empirical work has quantified many of the important relationships. However, geography and trade remains an area where progress is needed to develop robust tools that can be used to inform place-based policies (concerning trade, transport, infrastructure, and local economic development), particularly in view of the huge expenditures that such policies incur.
Fabrice Etilé and Lisa Oberlander
In the last several decades obesity rates have risen significantly. In 2014, 10.8% and 14.9% of the world’s men and women, respectively, were obese as compared with 3.2% and 6.4% in 1975. The obesity “epidemic” has spread from high-income countries to emerging and developing ones in every region of the world. The rising obesity rates are essentially explained by a rise in total calorie intake associated with long-term global changes in the food supply. Food has become more abundant, available, and cheaper, but food affluence is associated with profound changes in the nutritional quality of supply. While calories have become richer in fats, sugar, and sodium, they are now lower in fiber. The nutrition transition from starvation to abundance and high-fat/sugar/salt food is thus accompanied by an epidemiological transition from infectious diseases and premature death to chronic diseases and longer lives. Food-related chronic diseases have important economic consequences in terms of human capital and medical care costs borne by public and private insurances and health systems.
Technological innovations, trade globalization, and retailing expansion are associated with these substantial changes in the quantity and quality of food supply and diet in developed as well as in emerging and rapidly growing economies. Food variety has significantly increased due to innovations in the food production process. Raw food is broken down to obtain elementary substances that are subsequently assembled for producing final food products. This new approach, as well as improvements in cold chain and packaging, has contributed to a globalization of food chains and spurred an increase of trade in food products, which, jointly with foreign direct investments, alters the domestic food supply. Finally, technological advancements have also favored the emergence of large supermarkets and retailers, which have transformed the industrial organization of consumer markets.
How do these developments affect population diets and diet-related diseases? Identifying the contribution of supply factors to long-term changes in diet and obesity is important because it can help to design innovative, effective, and evidence-based policies, such as regulations on trade, retailing, and quality or incentives for product reformulation. Yet this requires a correct evaluation of the importance and causal effects of supply-side factors on the obesity pandemic. Among others, the economic literature analyzes the effect of changes in food prices, food availability, trade, and marketing on the nutrition and epidemiological transitions. There is a lack of causal robust evidence on their long-term effects. The empirical identification of causal effects is de facto challenging because the dynamics of food supply is partly driven by demand-side factors and dynamics, like a growing female labor force, habit formation, and the social dynamics of preferences.
There are several important limitations to the literature from the early 21st century. Existing studies cover mostly well-developed countries, use static economic and econometric specifications, and employ data that cover short periods of time unmarked by profound shifts in food supply. In contrast, empirical research on the long-term dynamics of consumer behavior is much more limited, and comparative studies across diverse cultural and institutional backgrounds are almost nonexistent. Studies on consumers in emerging countries could exploit the rapid time changes and large spatial heterogeneity, both to identify the causal impacts of shocks on supply factors and to document how local culture and institutions shape diet and nutritional outcomes.