Ending Food Subsidies: Nutritional, Welfare, and Budgetary Effects |
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| Authors: | Laraki Karim |
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| Institution: | The author is a professor of agricultural economics at the Institut et Vétérinaire Hasan II, Morocco. He is grateful to Jacques van der Gaag and Angus Deaton for contributions to an earlier version of this paper, to Dwayne Benjamin for his help with the estimation of the price elasticities, to Bruce Ross-Larson for his editorial comments, to the referees for their constructive criticism, and to Brenda Rosa for putting together the final version. Statistical assistance from the Moroccan Ministries of Planning, Economic Affairs, and Agriculture is gratefully acknowledged. |
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| Abstract: | Governments faced with growing budget deficits are cutting manysocial expenditures, including costly food subsidy programsthat have provided benefits to the rich and poor alike. Becausethe poor spend a larger share of their income on food than dothe rich, however, such cuts usually have negative distributional,welfare and nutritional effects. This article discusses themethodological issues in estimating the effects of price andtax reforms in developing countries. I apply a model that Deaton(1988) developed to estimate price elasticities from cross-sectiondata, the only reliable and detailed data available in mostdeveloping countries. I use measures of both real income andnutrition to evaluate the effects of changes in the Moroccanfood subsidy program. The analysis suggests that subsidies oninferior foods not consumed by the wealthy would reduce thewelfare costs to the poor and limit the budgetary expendituresrequired. |
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