Do Consumer Price Subsidies Really Improve Nutrition?
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.
We would like to thank Alberto Abadie, Chris Avery, Sebastian Bauhoff, Amitabh Chandra, Paul Cichello, Suzanne Cooper, Daniel Hojman, Brian Jacob, Elizabeth Lacey, Erzo Luttmer, Mai Nguyen, Albert Park, Maurice Schiff, John Strauss, Rodrigo Wagner, Sangui Wang, and Richard Zeckhauser for valuable discussions, and Frank Mou, Dulles Wang and Fan Zhang for research assistance. We gratefully acknowledge financial support from the National Institute of Aging, the William F. Milton Fund at Harvard Medical School, the Dean's Research Fund at the John F. Kennedy School of Government, the Center for International Development at Harvard University, and the Hefner China Fund. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Jensen, R., Miller, N. 2011. "Do Consumer Price Subsidies Really Improve Nutrition?". Review of Economics and Statistics, 93(4): 1205-1223.