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Submitted by Ugo on

Thank you, you raised several interesting points. Of course, the impact on local prices works in both directions, with food possibly decreasing food prices and cash potentially increasing them. Whether one or the other is desirable – say, food prices increases – is sometimes known as the 'food policy dilemma' - that is, it depends on factors like whether the poor are net (subsistence) producers or consumers, as well as on basic parameters such as the elasticity of supply and demand, and transfer size. To my knowledge there are some anecdotes of causality between transfers and prices. Examples that come to mind are the paper by Chabot and Dorosh examining the effects of food transfers on wheat prices in Afghanistan (a reduction of 15%) (http://www.sciencedirect.com/science/article/pii/S0306919206000789), and an assessment by Creti documenting some cash-induced, short-term price increases in Northern Uganda (http://www.humanitarianlibrary.org/sites/default/files/2014/02/impact_of_cash_transfers_on_local_markets_text_only_0.pdf). But it'd be interesting to conduct a more comprehensive review of the evidence on transfer-price causality of both cash and food transfers.