Adjustment with a Human Face? Evidence from Jamaica

— In September 1991 Jamaica liberalized its exchange rate as part of its Structural Adjustment Program (SAP). The sudden and steep devaluation associated with this policy move had serious repercussions for real purchasing power, poverty, general inflation, and food prices, especially staple foods such as rice and flour which are imported. This study evaluates the ‘‘social cost’’ of the liberalization policy by examining the behavior of preschool children s weight for height or wasting, an indicator of nutritional status that is sensitive to short term fluctuations in living conditions. Using 8 years of national microsurvey data for 1989–96, we apply ‘‘synthetic cohort’’ analysis to disentangle the separate impacts of child s age, date of birth, and measurement date, on weight for height. Estimates based on an exhaustive set of controls indicate that children weighed in the aftermath of the policy (November and December 1991) are significantly lighter (by 0.178 z-scores) than children weighed just a few months later, and children in urban areas were especially affected. When food price inflation is explicitly entered into the model, it is highly statistically significant, and reduces (but only slightly) the effect of being measured at the end of 1991. The calculated elasticity of weight for height z-score with respect to food price inflation is a very high )0.86. During the rapid economic reform in 1991, this elasticity rose to )1.24, indicating a large response of weight for height to food price inflation, as is to be expected in a small open economy. 2003 Elsevier Science Ltd. All rights reserved.