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Food security without food transfers?: A CGE analysis for Ethiopia of the different food security impacts of fertilizer subsidies and locally sourced food transfers

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  • Caria, A. Stefano
  • Tamru, Seneshaw
  • Bizuneh, Gera

Abstract

Both availability and access issues underpin Ethiopia’s food security challenges. The country is mostly dependent on drought-exposed, rain fed agriculture, and high transaction costs inhibit trade in staples. Most of the population lives in rural areas where poverty is widespread and livelihoods vulnerable to shocks and poverty traps. This paper looks at different approaches to improve food security in Ethiopia. Specifically, it compares the impacts on the access and availability dimensions of policy-based fertilizer subsidies, targeting yield growth against one of additional food transfers, sourced from local markets. It also explores the possibility of combining the subsidies with a switch to local procurement of current food transfers. It first runs a micro simulation model based on empirically estimated yield functions to quantify the likely effects of additional fertilizer application on national yields, suggesting a rather modest response. It then simulates the policies of interest using the static IFPRI standard CGE model, calibrated for Ethiopia using the 2005/06 social accounting matrix of the Ethiopian Development Research Institute (EDRI). Simulation results point in two directions. First, the food transfer policy is more effective at raising consumption of staples by the targeted rural poor. Second, the moderate yield growth induced by the subsidy shows economic multipliers, stronger effects on domestic supply and welfare gains accruing to all poor through increased factor incomes and decreased staple prices. Yield growth seems a promising avenue to pursue food security and, more generally, poverty reduction goals. Nevertheless, policies focusing on one dimension of the yield function alone, such as fertilizer subsidies, are unlikely to deliver the necessary improvement in yields. Food transfers may still be the most effective short- to mid-term answer to food access insecurity when high return agricultural productivity policies are not available and when internal resources can be used to bear policy costs, avoiding the exchange rate distortions associated with foreign financial assistance.

Suggested Citation

  • Caria, A. Stefano & Tamru, Seneshaw & Bizuneh, Gera, 2011. "Food security without food transfers?: A CGE analysis for Ethiopia of the different food security impacts of fertilizer subsidies and locally sourced food transfers," ESSP working papers 29, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:esspwp:29
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    References listed on IDEAS

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    1. Yu, Bingxin & Nin-Pratt, Alejandro & Funes, José & Gemessa, Sinafikeh Asrat, 2011. "Cereal production and technology adoption in Ethiopia:," IFPRI discussion papers 1131, International Food Policy Research Institute (IFPRI).
    2. Stefan Dercon & Pramila Krishnan, 2000. "In Sickness and in Health: Risk Sharing within Households in Rural Ethiopia," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 688-727, August.
    3. Clay, Edward & Benson, Charlotte, 1990. "Aid for food : Acquisition of commodities in developing countries for food aid in the 1980s," Food Policy, Elsevier, vol. 15(1), pages 27-43, February.
    4. Gelan, Ayele Ulfata, 2007. "Does food aid have disincentive effects on local production? A general equilibrium perspective on food aid in Ethiopia," Food Policy, Elsevier, vol. 32(4), pages 436-458, August.
    5. Nisrane, Fantu & Berhane, Guush & Asrat, Sinafikeh & Getachew, Gerawork & Taffesse, Alemayehu Seyoum & Hoddinott, John F., 2011. "Sources of inefficiency and growth in agricultural output in subsistence agriculture: A stochastic frontier analysis," ESSP working papers 19, International Food Policy Research Institute (IFPRI).
    6. Abdulai, Awudu & Barrett, Christopher B. & Hoddinott, John, 2005. "Does food aid Really have disincentive effects? New evidence from sub-Saharan Africa," World Development, Elsevier, vol. 33(10), pages 1689-1704, October.
    7. Ayele Gelan, 2006. "Cash or Food Aid? A General Equilibrium Analysis for Ethiopia," Development Policy Review, Overseas Development Institute, vol. 24(5), pages 601-624, September.
    8. Zerfu, Daniel & Larson, Donald F., 2010. "Incomplete markets and fertilizer use : evidence from Ethiopia," Policy Research Working Paper Series 5235, The World Bank.
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    Cited by:

    1. Ermias Engida Legesse & Amit Kumar Srivastava & Arnim Kuhn & Thomas Gaiser, 2019. "Household Welfare Implications of Better Fertilizer Access and Lower Use Inefficiency: Long-Term Scenarios for Ethiopia," Sustainability, MDPI, Open Access Journal, vol. 11(14), pages 1-24, July.
    2. Steve Bass & Shannon Siyao Wang & Tadele Ferede & Daniel Fikreyesus, 2013. "Making Growth Green and Inclusive: The Case of Ethiopia," OECD Green Growth Papers 2013/7, OECD Publishing.

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