Does food aid depress food production? The disincentive dilemma in the African context

Abstract

Food aid averages only ten percent of total financial aid to developing countries, but in certain African countries - Botswana, Cape Verde, Mauritius, and Mauritania - it represents more than half the food available for consumption. The author applies vector auto-regression (VAR) analysis to data for sub-Saharan Africa to test these hypotheses. The issue is not whether food aid is good or bad but how it can be used to promote economic development and improve the nutrition of the food-insecure. The author found that food aid has a significant positive effect on food production. Any disincentive induced by the additional supply of food is offset by the positive effects. Food aid is also more likely to have a positive effect in countries that use fertilizer intensively. One possible explanation for this is that countries that enjoy a relative abundance of regular food aid can use the resources made available through reduced food imports to invest more in the agricultural sector - which is more likely when such an investment is a condition imposed by the aid donors.

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