Self-Targeted Subsidies : The Distributional Impact of the Egyptian Food Subsidy System
The Egyptian food subsidy system is an untargeted system that is essentially open to all Egyptians. For this reason, the budgetary costs of this system have been high, and the ability of this system to improve the welfare status of the poor has bee...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/04/437752/self-targeted-subsidies-distributional-impact-egyptian-food-subsidy-system http://hdl.handle.net/10986/22207 |
| Summary: | The Egyptian food subsidy system is an
untargeted system that is essentially open to all Egyptians.
For this reason, the budgetary costs of this system have
been high, and the ability of this system to improve the
welfare status of the poor has been questioned. Since the
food riots of 1977, Egyptian policymakers have been
reluctant to make large changes in their food subsidy
system. Rather, their strategy has been to reduce the costs,
and coverage of this system gradually. For example, since
1980 policymakers have reduced the number of subsidized
foods from 20 to just four. Despite these cutbacks, the
author uses new 1997 household survey data to show that the
Egyptian food subsidy system is self-targeted to the poor,
because it subsidizes inferior goods. In urban Egypt, for
instance, the main subsidized food - coarse baladi bread -
is consumed more by the poor (the lowest quintile group of
the population) than by the rich (the highest quintile). So
subsidizing baladi bread is a good way of improving the
welfare status of the urban poor. Bur in rural Egypt, where
the poor do not consume so much baladi bread, the poor
receive less in income transfers than the rich. In many
countries, administrative targeting of food subsidies can do
a better job of targeting the poor than self-targeting
systems. In Jamaica, for example, poor people get food
stamps at health clinics, so the Jamaican poor receive
double the income transfers from food subsidies than the
Egyptian poor receive. Bur starting a comparable system in
Egypt, would be costly both in financial, and political
terms, because many non-poor households currently receiving
food subsidies would have to be excluded. For these reasons,
it is likely that the government will continue to refine the
present food subsidy system, perhaps by eliminating current
subsidies on sugar or edible oil. Neither of these foods is
an inferior good, so eliminating these subsidies will have
only a minimal impact on the welfare status of the poor. |
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