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Ending Food Subsidies: Nutritional, Welfare, and Budgetary Effects

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  • Laraki, Karim

Abstract

Governments faced with growing budget deficits are cutting many social expenditures, including costly food subsidy that have provided benefits to the rich and poor alike. Because the poor spend a larger share of their income on food than do the rich, however, such cuts usually have negative distributional, welfare and nutritional effects. This article discusses the methodological issues in estimating the effects of price and tax reforms in developing countries. I apply a model that Deaton (1988) developed to estimate price elasticities from cross-section data, the only reliable and detailed data available in most developing countries. I use measures of both real income and nutrition to evaluate the effects of changes in the Moroccan food subsidy program. The analysis suggests that subsidies on inferior foods not consumed by the wealthy would reduce the welfare costs to the poor and limit the budgetary expenditures required. Copyright 1989 by Oxford University Press.

Suggested Citation

  • Laraki, Karim, 1989. "Ending Food Subsidies: Nutritional, Welfare, and Budgetary Effects," The World Bank Economic Review, World Bank, vol. 3(3), pages 395-408, September.
    • Handle: RePEc:oup:wbecrv:v:3:y:1989:i:3:p:395-408
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    Cited by:

    1. Gibson, John & Rozelle, Scott, 2002. "Demand Systems With Unit Values: Comparisons With Elasticities from Market Prices," 2002 Conference (46th), February 13-15, 2002, Canberra, Australia 173980, Australian Agricultural and Resource Economics Society.
    2. Elsner, Karin, 1999. "Analysing Russian Food Expenditure Using Micro-Data," IAMO Discussion Papers 14909, Institute of Agricultural Development in Transition Economies (IAMO).
    3. Janury, A. de & Fafchamps, M. & Raki, M. & Sadoulet, Elisabeth, 1992. "A Computable Household Model Approach to Policy Analysis: Structural Adjustment and the Peasantry in Morocco," 1992 Occasional Paper Series No. 6 197890, International Association of Agricultural Economists.
    4. Elsner, Karin, 1999. "Analysing Russian food expenditure using micro-data," IAMO Discussion Papers 23, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    5. de Janvry, Alain & Fafchamps, M. & Raki, M. & Sadoulet, Elisabeth, 1991. "Structural Adjustment and the Peasantry in Morocco: A Computable Household Model Approach," CUDARE Working Papers 198578, University of California, Berkeley, Department of Agricultural and Resource Economics.
    6. Shikha Jha, 1992. "Consumer Subsidies in India: Is Targeting Effective?," Development and Change, International Institute of Social Studies, vol. 23(4), pages 101-128, October.

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