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Food Aid Delivery, Food Security and Aggregate Welfare in a Small Open Economy: Theory and Evidence

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  • Osakwe, Patrick N.

Abstract

A small-open-economy model is developed to examine how the method of food aid disbursement affects labor employment, food security and aggregate welfare, in recipient countries, in an environment in which private sector firms pay efficiency wages to induce effort. Two forms of food aid delivery are considered: first is project food aid, under which food aid is used to finance infrastructure development and consumers are required to participate in public projects in order to receive food aid; the second is non-project food aid, which we use to capture all forms of food aid distributed to consumers free of charge. The model suggests that, when food aid is used to finance infrastructure development, it has no labor disincentive effects in the food industry, increases food security and decreases the level of unemployment in the recipient country. When food aid is distributed to consumers free of charge, however, the model predicts that it creates labor disincentive effects in the food industry, increases the unemployment level and decreases food security. Under both methods of distribution, the effect of food aid on aggregate welfare is ambiguous. Empirical results provide suggestive evidence for the hypothesis that project food aid increases food security while non-project food aid decreases food security.

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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 98-1.

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Length: 52 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:bca:bocawp:98-1

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Keywords: Development economics;

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  1. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
  2. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
  3. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  4. Bliss, Christopher & Stern, Nicholas, 1978. "Productivity, wages and nutrition : Part I: the theory," Journal of Development Economics, Elsevier, vol. 5(4), pages 331-362, December.
  5. Swamy, Anand V., 1997. "A simple test of the nutrition-based efficiency wage model," Journal of Development Economics, Elsevier, vol. 53(1), pages 85-98, June.
  6. Esfahani, Hadi Salehi & Mookherjee, Dilip, 1995. "Productivity, contracting modes, and development," Journal of Development Economics, Elsevier, vol. 46(2), pages 203-231, April.
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Cited by:
  1. Titus O. Awokuse, 2006. "Assessing the Impact of Food Aid on Recipient Countries: A Survey," Working Papers 06-11, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).

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