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How Consumer Price Subsidies affect Nutrition

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  • Neeraj Kaushal
  • Felix Muchomba

Abstract

We study the effect on nutrition of an exogenous increase in food grain subsidy in rural India resulting from a program targeting the poor. Our analysis suggests that increase in income resulting from the food price subsidy changed consumption patterns in favor of the subsidized grains and certain more expensive sources of calorie, and lowered consumption of coarse grains that are cheaper, yet taste-wise, inferior sources of nutrition, but had no effect on calorie, protein and fat intake in poor households. Further, our analysis shows that households allocated some of the increase in income from food price subsidy to expenditures on non-food items. Estimates of the price effect of food price subsidy on the three measures of nutrition are also negligible. We find evidence that the decline in the price of wheat and rice, changed consumption patterns toward increased consumption of wheat and rice and lower consumption of coarse grains, the unsubsidized staple food. Our analysis thus suggests that food price subsidies are likely to affect agriculture markets without impacting nutrition.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19404.

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Date of creation: Sep 2013
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Handle: RePEc:nbr:nberwo:19404

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  1. Subramanian, S. & Deaton, A., 1994. "The Demand for Food and Calories," Papers 175, Princeton, Woodrow Wilson School - Development Studies.
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  12. Moffitt, Robert, 1989. "Estimating the Value of an In-Kind Transfer: The Case of Food Stamps," Econometrica, Econometric Society, vol. 57(2), pages 385-409, March.
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