Household Responses to Food Subsidies

Date: July 4th 2014 
Location: IEO
Presenter: Dr. Tara Kaul (University of Maryland/3ie)

This study uses household survey data to examine the effect of food subsidies on the nutritional outcomes of poor households in India. The national food security programme, known as the Public Distribution System (PDS), provides a monthly quota of cereals at substantially discounted prices. This study looks at the effect of the programme by exploiting geographic and household size specific variations in the value of the subsidy resulting from differences in state programme rules and local market prices. 
The study finds elasticities for cereal consumption and caloric intake with respect to the subsidy are small, but higher than estimates from prior literature on food subsidies. The elasticities for calories from all food groups are positive and significant. Thus, households benefit from the PDS in terms of overall food intake and not just through cereals. The study finds a smaller effect in states that have higher levels of corruption. Finally, the study uses the estimates to simulate the caloric impact of the new National Food Security Bill.