Does Food Aid Really Discourage Food Production?
Indian Journal of Agricultural Economics, Vol. 54, No. 2
Posted: 16 Aug 2006
We address the long standing concern that food-aid works as a disincentive for recipient country agricultural production, by increasing recipient food supply and driving down food prices. This analytical conclusion, while widely accepted in the literature, relies on implausible Arrow-Debreu Models, even though the structural deficiencies of recipient country markets are a central reason for receiving food aid. We use a theoretical framework that explores the implication of non-separable decisions caused by the widespread non-participation in labor, land, financial and food markets. Our analyses show that selective market failures that permeate low-income, high transaction-cost recipient economies render analytically ambiguous signs on key relationships between food-aid shipments and recipient agricultural production responses.
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