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AEC 2012 - Incentive and Crowding out Effects of Food Assistance Evidence from Randomized evaluation of a Food-for-Training Project in South Sudan

16-Oct-2012

Food assistance is one of the most common forms of safety net programs in developing countries. Though there are strong humanitarian arguments for such programs, they are often criticized on the grounds of their possible influence on creating disincentives to work and on crowding out private transfers. According to nutrition‐based efficiency wage argument, on the other hand, food assistance can increase ability to work and labor supply of the poor. Based on a randomized evaluation, this paper estimates the effects of a food‐for‐training program, which comprised of food transfer, training and access to credit services, on labor supply and informal transfers. We do not observe any significant effect of the program on the hours of work or the type of economic activities of the adult members. However, there was a significant negative impact (about 20‐25%) on per capita household income. This decline in income mostly came about through significant reduction in child labor. We also find that short‐term food transfer assisted the households to invest in durable assets, mostly in housing, which is a means for the poor to spread gains from a short‐term transfer program over their life‐cycle. Results do not show private transfers being crowded out for the participants although there was a positive effect on transfers given out by them. Further evidence suggests that these effects are primarily of food transfer component rather than training or credit component of the program.

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