Do Consumer Price Subsidies Really Improve Nutrition?

Robert T. Jensen, Nolan H. Miller

NBER Working Paper No. 16102
Issued in June 2010
NBER Program(s):   AG   HC

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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.

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Acknowledgments

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