Modified Price, Production, and Income Impacts of Food Aid under Market Differentiated Distribution

Keith D. Rogers, Uma K. Srivastava and Earl O. Heady

American Journal of Agricultural Economics, 1972, vol. 54, issue 2, 201-208

Abstract: Estimation of negative production impacts of food aid rests heavily on measurement of resulting price changes. Previous studies have assumed an exogenous shift in supply resulting from distribution of the imported commodities but have ignored the income effect on demand. Distribution of food aid commodities to consumers at concessional prices provides an increase in real income and corresponding shift in demand for food. The shift in demand compensates for part of the exogenous shift in supply, reducing the potential impact on domestic prices. Based on market differentiation, the production impact in India is estimated at one tenth of previous estimates.

Date: 1972
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