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Citation Information

Type Working Paper
Title The economics of food aid under subsistence farming with an application to Malawi
Publication (Day/Month/Year) 2010
URL http://www.feweb.vu.nl/nl/Images/WouterZantFADO_tcm96-185174.pdf
We investigate the impact of food aid on price and production of staple food with a simple partial equilibrium supply and demand model for staple food with non-separable production and consumption. The model specifications cover different forms of emergency food aid distribution. Impact of food aid on price and production is simulated with a range of plausible values of the coefficients of the structural model. Model simulations indicate a positive impact on production if demand side influences of food aid dominate and a negative impact if supply side influences dominate. A larger share of food aid in total staple food demand contribute significantly to the negative impact of food aid on staple food production and a smaller share of income from staple production in total household income contributes significantly to the positive impact of food aid on staple food production. Using the derived relationships and complementary to the simulations, structural and reduced form price and production equations are estimated on the basis of a comprehensive district level data set of the Malawi maize market for the period from 1999 to 2010.Estimated production and price equations are all well behaved. We find a statistically significant small positive impact of food aid on maize prices and maize production. It is concluded that both direction and size of impact of food aid depend on how food aid is distributed, on supply and demand elasticities of staple food, on the share of food aid in total domestic staple food demand and on the share of income from staple food production. Wide-spread and large disincentives for staple food producers and distortion of staple food markets caused by food aid are not likely given the relatively small size of food aid. Positive impacts of food aid may occur as well as the Malawi evidence indicates.

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