The Economics of Food Aid under Subsistence Farming with an Application to Malawi

We investigate how food-aid affects price and production of staple food, with a partial equilibrium model with non-separable production and consumption. The model captures the key characteristics of sub-Saharan Africa subsistence economies. Simulations generate negative but also positive food-aid elasticities of production. Conditions are identified which mitigate the negative impact and support a positive impact. The share of domestic food production in total staple food demand (+) and the share of income from staple food production in total household income (-) are key determinants. Price and production equations, estimated with a panel of district data of the Malawi maize market for the period 1999-2010, show a small positive impact of food-aid. Large negative impacts of food-aid are not likely given production and income shares and behavioural responses. © 2011 Elsevier Ltd