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Food Aid, Food Prices, and Producer Disincentives in Ethiopia

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  • Getaw Tadesse
  • Gerald Shively

Abstract

Although the short-term aims of food aid are well conceived, strong concerns have been voiced regarding the long-term impacts of such aid on incentives for agricultural producers in recipient countries. This article examines the statistical link between food aid shipments and food prices in Ethiopia over the period 1996-2006. Monthly data from three markets and three commodities are used to estimate a system of seemingly unrelated regression models for food prices. Results indicate that previous year food aid shipments reduce prices in all producer and consumer markets. These effects, however, appear to be limited to the set of internationally traded commodities that are domestically marketed. A recursive regression procedure is used to identify the food aid threshold at which a negative aid effect emerges. Food aid shipments that constitute less than 10% of domestic production appear to be benign, but shipments above this level show signs of being disruptive to local markets. We use a simple policy simulation to argue that production-sensitive targeting, e.g., conditioning food aid on local food production, would help to circumvent disincentive effects. Copyright 2009, Oxford University Press.

Suggested Citation

  • Getaw Tadesse & Gerald Shively, 2009. "Food Aid, Food Prices, and Producer Disincentives in Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 942-955.
  • Handle: RePEc:oup:ajagec:v:91:y:2009:i:4:p:942-955
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2009.01324.x
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    Cited by:

    1. Minten, Bart & Stifel, David & Tamru, Seneshaw, 2012. "Structural Transformation in Ethiopia: Evidence from Cereal Markets:," ESSP research note 14, International Food Policy Research Institute (IFPRI).
    2. Garg, Teevrat & Barrett, Christopher B. & Gómez, Miguel I. & Lentz, Erin C. & Violette, William J., 2013. "Market Prices and Food Aid Local and Regional Procurement and Distribution: A Multi-Country Analysis," World Development, Elsevier, vol. 49(C), pages 19-29.
    3. Sinyolo, Sikhulumile & Mudhara, Maxwell & Wale, Edilegnaw, 2016. "To what extent does dependence on social grants affect smallholder farmers’ incentives to farm? Evidence from KwaZulu-Natal, South Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(2), June.
    4. Kassie, Menale & Jaleta, Moti & Shiferaw, Bekele A. & Mmbando, Frank & Mekuria, Mulugetta, 2012. "Interdependence in Farmer Technology Adoption Decisions in Smallholder Systems: Joint Estimation of Investments in Sustainable Agricultural Practices in Rural Tanzania," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126791, International Association of Agricultural Economists.
    5. Ruerd Ruben, 2012. "Dimensionner l'aide au développement : ce que nous enseigne l'évaluation. Dimensioning Development Aid: Some Lessons from Evaluation," Revue d’économie du développement, De Boeck Université, vol. 20(4), pages 95-123.
    6. Ferrière, Nathalie & Suwa-Eisenmann, Akiko, 2015. "Does Food Aid Disrupt Local Food Market? Evidence from Rural Ethiopia," World Development, Elsevier, vol. 76(C), pages 114-131.
    7. Harou, Aurélie P. & Upton, Joanna B. & Lentz, Erin C. & Barrett, Christopher B. & Gómez, Miguel I., 2013. "Tradeoffs or Synergies? Assessing Local and Regional Food Aid Procurement through Case Studies in Burkina Faso and Guatemala," World Development, Elsevier, vol. 49(C), pages 44-57.
    8. Kiawu, James & Jones, Keithly G, 2013. "Implications of food aid and remittances for West African food import demand," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 8(1), July.
    9. Hoddinott, John & Margolies, Amy, 2012. "Mapping the Impacts of Food Aid: Current Knowledge and Future Directions," WIDER Working Paper Series 034, World Institute for Development Economic Research (UNU-WIDER).
    10. repec:unu:wpaper:wp2012-34 is not listed on IDEAS
    11. Yami, Mesay & Meyer, Ferdi & Hassan, Rashid, 2016. "Testing price leadership role in major regional maize markets in Ethiopia," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249439, African Association of Agricultural Economists (AAAE).
    12. Nathalie Ferrière & Akiko Suwa-Eisenmann, 2014. "Does food aid disrupt local food market? Evidence from rural Ethiopia," FOODSECURE Working papers 26, LEI Wageningen UR.
    13. Goytom Abraha Kahsay & Workineh Asmare Kassie & Abebe Damte Beyene & Lars Gårn Hansen, 2017. "Do public works programs crowd-out pro-environmental behavior? Empirical evidence from food-for-work programs in Ethiopia," IFRO Working Paper 2017/13, University of Copenhagen, Department of Food and Resource Economics.
    14. Ceballos, Francisco & Hernandez, Manuel A. & Minot, Nicholas & Robles, Miguel, 2017. "Grain Price and Volatility Transmission from International to Domestic Markets in Developing Countries," World Development, Elsevier, vol. 94(C), pages 305-320.
    15. Kassie, Menale & Jaleta, Moti & Shiferaw, Bekele & Mmbando, Frank & Muricho, Geoffrey, 2012. "Plot and Household-Level Determinants of Sustainable Agricultural Practices in Rural Tanzania," Discussion Papers dp-12-02-efd, Resources For the Future.
    16. Sulaiman, Munshi, 2010. "Incentive and crowding out effects of food assistance: evidence from randomized evaluation of food-for-training project in Southern Sudan," LSE Research Online Documents on Economics 58095, London School of Economics and Political Science, LSE Library.
    17. Kassie, Menale & Jaleta, Moti & Shiferaw, Bekele & Mmbando, Frank & Mekuria, Mulugetta, 2013. "Adoption of interrelated sustainable agricultural practices in smallholder systems: Evidence from rural Tanzania," Technological Forecasting and Social Change, Elsevier, vol. 80(3), pages 525-540.
    18. Sumberg, James & Sabates-Wheeler, Rachel, 2011. "Linking agricultural development to school feeding in sub-Saharan Africa: Theoretical perspectives," Food Policy, Elsevier, vol. 36(3), pages 341-349, June.
    19. Zant, Wouter, 2012. "The economics of food aid under subsistence farming with an application to Malawi," Food Policy, Elsevier, vol. 37(1), pages 124-141.

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