Many developing countries use food-price subsidies or price controls to improve the nutrition of the poor. However, subsidizing goods on which households spend a high proportion of their budget can create large wealth effects. Consumers may then substitute towards foods with higher non-nutritional attributes (e.g., taste), but lower nutritional content per unit of currency, weakening or perhaps even reversing the intended impact of the subsidy.
We analyze data from a randomized program of large price subsidies for poor households in two provinces of China and find no evidence that the subsidies improved nutrition. In fact, it may have had a negative impact for some households.
That is a new paper by Rob Jensen and Nolan Miller.
Nolan first taught me micro theory. Rob employed me on my first survey. They bear much of the blame for making me an applied micrometrics scholar…
5 Responses
Thank you. As an economist in a nutrition department, I collect papers like this to show my colleagues.
Choice 1: I have $1. I can spend it on low-nutrition food at 10 cents per serving and get through the week
Choice 2: I have $1 and am subsidized so I can buy an additional $0.50 worth of nutritious food (think WIC/SNAP restrictions).
I buy $0.50 of nutritious food, spend another $0.70 on other foods (a mix) and have $0.30 to spend on other items.
Is there an ungated copy of the paper? I can see a Substitution Effect (reallocating free cash flows to buying more non-nutritious food–as part of an overall mix that is likely more nutritious overall), but I can’t see a decline in diet from the previous non-subsidized state.
Here a working paper version (October 2008): http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.155.1664&rep=rep1&type=pdf
Knowing nothing of this sort of thing I will venture a comment anyway.
If I understand correctly from your entry above, Jensen and Miller are saying that when the subsidies are out there, the poor have money to spend on ‘junk’ food. My question is, if a person has extra money to spend on junk-ish food, then do they need a subsidy??
And, again, I know nothing of this sort of thing and I’m not suggesting that people not be given subsidies, its just that, to me, the thing that stands out here is that poor people in china are able to waste money on preferred foods, and that this undermines subsidies in two ways; (1) it doesn’t improve nutrition and (2) it goes to people that /could/ get along without it in the first place.
Re: “extra money” – the people receiving the subsidy earned less than $0.80 per day. It’s not switching to ‘junk’ food, but from rice to meat.