Good Intentions Aren’t Created Equal: A General Equilibrium Analysis of Food Aid Policies in Ethiopia

Jenny Spencer

No 332576, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The combination of Ethiopia’s dependence on agriculture and its vulnerability to drought and famine have led to wide-scale chronic poverty and food insecurity and a greater reliance on food aid than any other country in the world. With the creation of the Productive Safety Net Program (PSNP) in 2005, the Government of Ethiopia and donors took a step to move away from the emergency food aid system and toward a longer-term, more sustainable, government-led safety net program. However, the development of the program involved many debates, particularly around the ideal composition of aid to be provided to beneficiary households. This study employs a social accounting matrix and computable general equilibrium (CGE) model to examine the economy-wide effects of internationally-procured food aid and cash transfers. It finds that internationally-procured food aid creates disincentive effects for domestic producers and does not, in fact, increase the availability of cereals in the country, resulting in decreased net household food consumption. In response, a government subsidy to domestic producers could be implemented to counteract many of these negative effects, but it is an expensive policy that the government cannot afford over the long-run. Conversely, cash transfers are shown to have positive multiplier and spillover effects for households and to benefit producers. However, data and model constraints suggest that further work should be done to validate these findings.

Keywords: Agricultural and Food Policy; Food Security and Poverty (search for similar items in EconPapers)
Pages: 34
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332576

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