Does Food Aid Really Have Disincentive Effects? New Evidence from Sub-Saharan Africa

Abstract

There exists negligible empirical evidence to either refute or confirm the pervasive belief that food aid has significant disincentive effects on recipient food production at both micro and macro levels. This paper aims to fill this void. Using household level data from rural Ethiopia, we demonstrate that while simple descriptive statistics and naïve regressions indeed appear consistent with the disincentive effects hypothesis, those results appear to result from failure to control properly for endogeneity associated with targeting-related placement effects. Once one controls properly for such effects, no empirical support remains for the hypothesis that food aid creates disincentive effects. The macroeconomic evidence yields similar findings. Applying vector autoregression methods to a 1970-2000 panel of national-level data, with proper controls for country-specific unobservables, disasters and rainfall anomalies, we similarly find that food aid has no disincentive effect on food production. If anything, it has proved stimulative in sub-Saharan Africa.