The Potential and Limitations of Self-Targeted Food Subsidies

Can self-selection ofsubsidized commodities be used as a mechanismto transfer income to the poor? Evidence from two self-targetingprograms, one in South Africa and one in Tunisia, shows thatalthough self-targeting can clearly improve the distributionof food subsidies to the poorest members of society, its powerto alleviate poverty and reduce income disparities is limitedby preference patterns, income inequality, and the size of theindividual subsidies. Self-targeting through quality and productdifferentiation can be a useful means to reform existing universalsubsidy schemes, but it should be considered a transitionaltool while the capacity for implementing more precise mechanisms is developed.