DOES FOOD AID REALLY DISCOURAGE FOOD PRODUCTION?

Abstract

We examine whether food aid necessarily acts as a disincentive to food production in recipient economies. Since structural deficiencies of markets are a central reason why low-income agrarian economies receive food aid, we adopt a modeling framework that accommodates incomplete or imperfect markets. This simple, nonseparable, representative household model highlights the factor market effects of food aid overlooked in conventional, Schultzian analyses and, thus, the ambiguous effects of food aid on food production incentives in recipient economies.

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