Food Subsidies in Developing Countries Costs, Benefits, and Policy Options
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P , (- ,&. .. -L 2 Food Subsidies in Developing Countries Costs, benefits, and Policy Options EDITED BY PER PINSTRUP-ANDERSEN Published for the International Feod Policy Research Institute The Johns Hopkins Univrsity Press Baltimore and London v Cc 1988 The International Food Folicy Research Instiute All rights reserved Printeu in the I jnited Sttcs o' \ merica The Johns Hopkies tliscrsiil.', rcss. 701 W,,t 40th Street. laltimorte, Marylaind 21211 The Johns lopkins Press l.d., London Ihe paper used ii Ibis pablication leet Ox mininim requirements of American Nat oti.I Standa:I for InIforroatiwn Sei.ncs-- lrlilence it )"apertor Printed Li:orary Materials. ANSI ,.4 -I-84. LIIIRARY OF (ON(R FSS (A[IA I OG IN i- IN-PUB IJICATrION DATA Food subsidics il dCC'hIOll cottnlricv: costs, benefits, and policy optionsiedited by Per Pinstrup-pAndersen. I). dilo. Bioliography: p. IncIludes in~dex. ISBN 0-8018-3032-8 I. AgricuItural ubsidics- Dovcloping countries. 2 Food relief.- Decloping countrie . I. Pin strup-Andersen, Per. 11.IntcrnationalI ood Pol. 'yResearch Institute. H D9018.D41F6no I 18 88-1709 338.1 '8--dclVl CIP Other Books Published in Cooperation with The International Food Policy Research Institute AgriculturalChange and R ral Puvertv Variatiins oin a "l'h1mvY lharm Narain, edited by John W. Mellor and Guoviant M. I)eai Crop Insuorance lor Agricultural .,vloplem I lsA 01s and L;.xpi.rience, edited by Peter Hazcl, Carlos PimiLdrida. and Alberto Vahld3s Accelerating Food boducttion in Sub- Soharin Africa, edited 'y John W. Mellor, Christoplier L. D.elgado. and Malcolm J. Blackie Agricu.'rural Price Po/icy /fur Di'cv'hqfiug Countries. edited by Johl W. Mellor mrid laisoddin Ahmed Contents List of Tables and Figures xi Preface xv PART I Introduction I The Social and Economic Effects of Consumer-Oriented Food Sub sidies: A Summarv of' Current Evidence 3 PER PINSTRUP-ANI)ERS"N PART Ii Synth;.ses of Findings 2 File E'fectiveness of Consumer-Oriented Food Subsidies in Reach ing Rationing and Income Transfer Gov!!s 21 PER PINSTRUP-ANDFRSFN AND HAROLD ALDERMAN 3 Food Consumption and Nutritional Effects of Consumer-Oriented Food Subsidies 30 SHUBH K. KUMAR AND HAROLD ALDERMAN 4 Macroeconomic and Trade Implications of Consu mer-Oriented Food Subsidies 49 GRANT M. SCOIIE 5 Explicit versus Implicit Food Subsidies: Distribution of Costs 77 ALBERTO VALD.-ES 6 Implications of Consumer-Oriented Food Subsidies for Domestic Agriculture 92 JOACHIM VON BRAUN 7 Political Calculations in Subsidizing Food 107 RAYMOND F. HOPKINS 8 Design and Implementation Considerations for Consumer-Oriented Food Subsidies 127 BEATRICE LORGE ROGERS viii Contents 9 Alternatives to Consumer-Oriented Food Subsidies for Achieving Nutritional Objectives 147 EILEEN T. KENNEDY 10 lncomne-Au,-uent ini, Inuterventions and Food Self-Sufficiency for Enhancing Food Consumptiom among the Poor 151) SlHLOMO RUI'TI.I NG; PART III Results from Country Studies II Food Subsidies in I.gypt: Benefit )istribution and Nutritional Effects 171 IAROLD AI+I.RMAN 12 Food Subsidies in Egypt: Implications for the Agricultural Sector 183 JOACIIM VON BRAUN 13 Food Subsidies in l.gypt: Macroeconomic and Trade Implications 19 GRANT M. SCO1II 14 Food Subsidies in the Ihilippines: Preliminary Results 206 MARITO GARCIA 15 Structure, Costs, and Benefits of Fo)od Subsidies in Bangladesh 219 RAISUIDDIN AIIMID 10 Costs and Benefits of Food Subsi(dies in India 229 P. S. (;FOR(;E 17 Pakistan's Ration SYsten: Distribution of Costs and Benefits 242 BEATRICE [ORGI RC;IERS 18 Food Subsid v Chantges ii, Sri Lanka: The Short-Run Effect on the Poor 25.3 NEVILL.E Ett-RISINGHFE 19 E.ffects of Br/iliall Wheat Subsidies on Income Distribuion and Trade 207 GERAI)O M. (Ai.E(AR AND (. EDWAR) SCIUHl 20 Fiscal Cost and Welfare Effects of the Mai/e Subsidy in Mexico 277 NORA ILUSTIG; 21 Design, Incole Distribtion, and Consuiitlion Effects of Maize Pricing Policies in Zanbia 28) SIiUI-I K. KUMAR Contents ix 22 Distributional Consequences of Alternative Food Policies in India 301 HANS P. BINSWANGER AND IAIMF B. QUIZON PART IV Implications for Food Policy: Generalizing Beyond Study Countries 23 Some Macroeconomic Policy Imiplications of Consu mer-Oriented Food Subsidies 323 AMMAR SIAMWAI.I.A 24 Sonic Microeconomic Policy Implicat ions of Consu nier-Oriented Food Subsidies 331 PER PINSTRIIP-ANDFRSEN References and Bibliography 341 Contribtors 301 Index 305 Tables and Figures Tables 1.1 Characteristics of subsidy programs, selected countries 6 4.1 A summary of issues raised by the Ministry of Economy and Trade, Costa Rica 52 4.2 FEgyptian rice market, 1976 60 4.3 Effects of alternative food policies in Indonesia, projections for 1990 67 4.4 Changes in the real price of bread and net wheat imports in develop ing countries 68 4.5 Relative prices of bread and wheat imports in developing countries 08 5.1 Government outlays on explicit food subsidies, selected countries 84 AS. I Costs and benefits of Chile's PNAC, average per beneficiary 90 6.1 Economic indicators, selected countries with consumer-oriented food subsidies 95 6.2 Importance of explicit food subsidies and outreach to tile rural population, selected countries 90 6.3 Effects of Egyptian food subsidies on income distribution within agriculture, 1981/82 98 6.4 Price structure of the major cereal crop, selected countries 100 9.1 Comparison of food subsidy programs, Mexico and tile Philippines 150 9.2 Cost comparison of food subsidy programs, Mexico and the Philippines 150 9.3 Comparison of supplementary feeding programs, selected countries 152 9.4 Costs of supplementary feeding programs, selected countries 152 9.5 Costs of two integrated health and nutrition projects: Tamil Nadu and Narangwal, India 154 9.6 Mortality rates of Narangwal children by experimental groups 154 10.1 Estimating equations of energy content in per capita national diet across developing countries, 1976-1980 165 xi xii Tables and Figures 10.2 Relation between growth rate in energy content of per capita diet and growth rates ill per capita ilcole and self-suifficieney ratio of cereal supplies, 1970-1980I 00 11.1 Income transfer frol food subshies and distorted prices, Fg'pt, 1981 82 178 12.1 Income transters from food subsidies and distorted prices in fari households, I+'gpt 188 12.2 Aggregate cereal balances for rural households, Egypt , 1981, 82 193 14.1 Share of income contributed bY the suhsidy, hv iicome group. the Philippines 21f) 15.1 Public distributil of Iodirails. bY calegoi-y of subsidy. Bangladesh 221 15.2 Budgetlar\ subsidv on t lie fooulgrain accoint, Bangladesh 223 16.1 Annual cost to tiheCgoVrnIMIL1r1 (1f the tl (graii Suthsidy. India 234 16.2 G(overiiIrt Cost of he corumSIrier slhidY per tori of grain. India 23-1 16.3 D)istribution of ratiol,.0 i'oodgrains amiong incomrie groups ill Kerala. Gujarat, and lamil Nadu 237 16.4 Value of rationted foodgrains at opei-niarket and market-clearing prices, India 238 16.5 Possible reduction in calorie intake from the abolition of rationing, India 23 17.1 Government expendit ures on I ,d sub,sidies, Pakistan 250 18.1 Fiscal costs of subsidy and transfer ttograills, Sri l.anka 25,8 18.2 Distributi tii of food subsid' and stamnp tramisfers aniong income groups, Sri Lanka 2 1 18.3 Relative contribuutio ol goverinient transflrs ih total househol expenditures. Sri Lanka 2h2 18.4 Incidence of the tltrapoor iii agriculture,. Sri Lanka 26.3 18.5 Coitributiort Of incoic transfers through food stamps aid food subsidies to total calories. 1,VXlleniditir class. Sri lanka 204 19.1 Estimated subsidies oi wheat prolduction anti co:nstrmption with the official and shadow price foreign elsciarige rates. Bra/i! 271 19.2 Estimated changes in production, clnlsution. and imports if tire free-trade world pricc had prc%:ilcd. Bra,il 2-2 19.3 Fstiriated aVer-a.t ,ffects of the lrolluictioti arid consilipliont subsidies undter the oflficial arid shadow loreign e'xchange rates., Bra- Atl 274 20.1 Distribution ol u bsidies among crops. Mexico 2 t 20.2 Target and rortarget iopulations, Mexico. I,)- 281 20.3 Average incomes. patterns of expentduiture. and onsunlription shares. by siucioeconoiliC class. Mexico. fJQ9' 282 20.4 Average incomes. patterns of expenditure, and corisutirlption shares of the maize and nonilaize agricultural producers, Mexico, 1977 282 Tablehs and Figures xiii 20.5 Proportion of income derived from maize ard average blidget shares of maize for maize producers, 1b class, Mexico, 1977 28,5 21.1 Trends in the consumcr subsidy, for maize, Zamlbia 294 21.2 Fiscal cost of maize rarketing policy, Zambia 290 21.3 Breakdown of NAMIOARI) cost in uraiiC rIrarketing. Zambia 20 22.1 Changes in economic indicators Iroi lllntargeted food subsidies and tirban raion shops. India, 11)7 - I t()o 22.2 Changes in economic indicators from food stamp subsidies targeted to the poor. India, I)731 74 308 22.3 Changes in economic indicators rom supply-oriented progr.s, India, 1073 7-4 310 Figures 1.1 Overview Of tl Le'fects o01COrsrtrcr-OrirLted hood subsidies 4 4.1 Effect of governlnlt policies ol el.ctise price received bv produccs 50 4.2 Taxation 0Cd ai/anian coffeeC I)rOducCrs 5h 4.3 Food subsidies in a political cconmyV selling 7 12.1 Shares of food subs.idies and agriculture illthe total Igyptian budget, 1071-8() 18,5 12.2 I)ev'ehopicnt Of food subsidie, arld tiletax blrdenll oll Egyptian agriculture, 1970-1980(1 1A) 13.1 The analstical scheime IQ'4 14.1 Map of the Philippines indicating stu(d'v areas 207 14.2 Deliverv system for the Philippine pilot ood discouit projec 208 19.1 Distribution ffect of conlsur]nptiou stibsid*y.