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Do Consumer Price Subsidies Really Improve Nutrition?

Robert T. Jensen1,2; Nolan H. Miller3

1 John Brown University · 2 Brown University · 3 University of Illinois Urbana-Champaign

The Review of Economics and Statistics 2011

Many developing countries use food-price subsidies or controls to improve nutrition. 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 subsidy's intended impact. 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. (JEL I38; O12; Q18).

DOI
10.1162/rest_a_00118
Volume
93 (4)
Pages
1205-1223
Language
en
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