Food aid to developing countries: A survey

Determinants of the levels and distribution of PL 480 food aid: 1955–1979

second major wave of concern about natural resource policy since World War II and the fourth since Malthus [28]. The first postwar period of concern occurred about 1950 and emphasized the relationship between available and projected resources and economic growth. The oft-quoted but little-heeded reports1 of the President's Materials Policy Commission [23] and the Water Resources Policy Commission [24] were basically concerned with scarcity or, in contemporary jargon, "short-falls." Scarcity was defined more as a physical concept than an economic one, relating production capacity and reserves to projected needs. The second postwar wave, according to Ruttan, shifted from traditional concern for adequacy of the natural resource base to stress on environmental consid-

Some Impaets of the Changing Energy Situation on U. S. Agriculture

This study is a theoretical and empirical analysis of the economic impact of food aid on producer incentives in developing countries. The special focus is on the so-called disincentive hypothesis, which argues that food aid tends to lower food prices, reduce domestic production and thus worsen the country's economic problems. The aim is to assess how valid is this disincentive effect of food aid on the agricultural production. For the evaluation of the disincentive effect, empirical data from Tanzanian agriculture was collected, the data covering years 1971-1996. The theoretical models of agricultural production were developed reflecting the institutional circumstances in Tanzania. The study starts with a review on the previous theoretical and empirical analyses of disincentive effect. A parametric market model for agricultural production with food aid is then formulated and analysed. Relative to the previous disincentive literature the theoretical model of agricultural production developed includes as a new element producer risk in the form of an uncertain crop price. Since Tanzanian food markets were divided into the official government controlled market and the illegal unofficial market, the supply model consists of a model for controlled markets with fixed prices and a model for unofficial markets with price risk. Based on the derived concepts of crop supply and market equilibrium, the disincentive hypothesis was tested with an econometric model of the market equilibrium in the unofficial market. Empirical findings did not indicate a statistically significant disincentive effect on the maize production. Instead it turned out that a price effect dominated the disincentive effect in the unofficial markets, since in years of low domestic production food aid was channelled to official markets and the unofficial markets reacted with higher prices. The incompletely integrated markets accentuated the situation, the more reliable yields of the Southern Highlands did not reach the deficient Northern areas and food aid and commercial imports tended to remain at the coast and in Dar es Salaam.

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Food Aid and the Disincentive Effect in Tanzania

Can foreign aid be harmful to the recipient country? This question has often been raised with respect to the United States' Public Law 480 program of agricultural surpluses, especially in response to the seeds of doubt planted by Theodore Schultz,I who speculated that the recipient's domestic supply elasticity would be positive and that therefore local production would suffer from increased imports However, no clear evidence of damage has yet come to light In 1963, Franklin Fisher formally demonstrated that the impact of additional surplus imports on domestic production depended on the elasticities of domestic demand and supply2 Olson had insisted that quite possibly the elasticity of agricultural supply in developing countries was zero due to the lack of alternative uses for resources employed in the agricultural sector3 Khatkhate even suggested the possibility of a negative supply response to the fall in price caused by additional imports4 Fisher emphasized the need for empirical work to resolve this dispute In 1967 Mann published the results of a study of the impact of PL 480 in India indicating that domestic production had fallen by less than the increase in PL 480 imports, so that there had been a net increase in cereal

The Side Effects of Foreign Aid: The Case of Public Law 480 Wheat in Colombia

Changes in foodgrain prices and domestic output caused by changing the quantity of U. S. Public Law 480 shipments to a hypothetical country show that both prices and output are highly sensitive to elasticities of supply and demand. But for many cases examined, changes in these shipments had relatively insignificant price-output effects and these could have been offset by a modest growth in population. Estimates of parameters for India indicate that a 20-percent increase in the quantity of foodgrain shipments between 1956-57 and 1961-62, other things being equal, would have decreased foodgrain prices 1.6 percent and domestic foodgrain output 0.4 percent. These disincentives may be outweighed by the effects on consumption, income distribution, and resource allocation, suggesting that, overall, the effects of P. L. 480 shipments are beneficial. HERE has been a good deal of argument over adverse and positive effects of U. S. Public Law 480 shipments. Of particular concern to policy makers is the effect of shipments on prices and domestic output in recipient countries. Witt has concluded that "all indications are that this [disincentive effect] is one of the most critical problems for P. L. 480. It should, therefore, be given the highest priority" [14, p. 88]. Economists hold diverse views about these effects, including the following: 1. Because the domestic supply curve for foodgrains is highly price-inelastic or even negatively sloped, P. L. 480 shipments affect output only slightly even though they do cause prices to decrease [5, 10]. The result is a redistribution of income away from the agricultural sector. 2. By lowering prices for foodgrains, P. L. 480 decreases output as producers shift resources to the production of nonfood products. Although the composition of output changes, total farm production does not change because aggregate supply is very inelastic [1]. 3. Although lower prices for foodgrains do not significantly affect short-run supply, they discourage private investment; lower private investment, in turn, diminishes long-run output. P. L. 480 shipments also allow governments to neglect public investment in the agricultural sector, and this neglect also hinders long-run output [4, 12]. Without subscribing to any of these arguments, I develop a conceptual framework in order to isolate and obtain probable bounds on the price-output effects. This is accomplished by comparing various combi* I appreciate the guidance of Dale E. Hathaway in conducting the research on which this article is based and the suggestions of Dupe Olatunbosun in preparing the final manuscript.

An Evaluation of the Disincentive Effect Caused by P. L. 480 Shipments

This paper addresses the question of food policy from the standpoint of the domestic food industry.' My thesis is that the turbulent 1972-75 period has been unique and should not be used as a prototype of future problems. Several of the destabilizing influences during this period should be less significant in the future. Moreover, coming as it did after a long period of relative price stability, it caught both the food industry and the government off guard, and their initial responses often exaggerated the situation. The food industry has been operating under conditions of greatly increased uncertainty since 1972. One source of additional uncertainty has come from food markets themselves: fluctuations in the supply and demand for food commodities generated short-term price volatility and concurrently contributed to doubts about the longer-term outlook. The second major source of new uncertainty derives from governmental policy: unexpected government interventions have become more frequent, and the absence of a political consensus on food issues leaves the most probable future policy in doubt. There is an obvious interaction between market instability and government policy. Economic pressures in food markets enabled the government to discontinue obsolete production-control and export-expansion programs that had been widely criticized from an economic standpoint. However, the same economic pressures intensified conflicts between various interest groups and brought forth new government measures that added to uncertainty. As one would expect, processes of adjustment have been set in motion in the food industry. Firms are altering business practices as the food industry searches for a new equilibrium. A similar search is also underway within the government, as the political system attempts to arrive at a new policy equilibrium. This process is slow and complex because it involves the resolution of conflicts between divergent interest groups and economic philosophies. In particular, conflicts between domestic and international objectives will be difficult to resolve. The food industry's adjustment depends on some prediction about future government policy, but this depends on many imponderables including market developments. This state of affairs has caught the food industry in an intense national debate about proper food policy. Firms are making decisions with little certainty about the rules under which they will operate.

Food Policy: Implications for the Food Industry

FTER 20 YEARS of agricultural policy characterized primarily by government controls designed to constrain the production of farm products, agricultural policy in the United States has recently undergone a major reversal. Beginning in late 1972, agricultural policy became production-expansive, with agriculture now freed of most restraints on production in order to meet domestic food needs and a potential $20 billion export market. At the same time government controls over much of the remainder of the food sector, which were relatively minor or nonexistent during most of these 20 years, have increased greatly since August 1971. Both developments-fewer controls on the farm sector and more controls on the food sectorhave occurred in response to a growing worldwide scarcity of food. The public discussion over food prices and policies continues, with analysts divided over issues and solutions. Some emphasize the need to manage exports, others the merits of expanding exports; some the need to build buffer stocks, others the pitfalls of planned stockpiling; some stress all-out production, others the dangers of contributing to a boom-bust farm economy; some argue that food shortages endanger general price stability, others that they burden poor countries via diminished food assistance; and quite a few are quietly waiting for the return to days of surpluses and support-level prices. Many unresolved issues on food policy remain with us in 1974. This paper is an initial attempt to outline the food policy problems facing this nation in the mid-1970's-problems that have taken on national and international significance. These issues command an important set of consequences for many millions of people.

Food Policy Issues in the United States

sources to developing a better understanding of the costs as well as the benefits of regulation. This will enable the political system to formulate regulatory policy more responsibly and it will help regulatory agencies implement that policy most efficiently. I am pleased to be invited to participate in this conference as I firmly believe that the application of economic analysis to this relatively new area of public policy has the potential for high social returns compared with other areas of work. When I came to Washington from Oregon State University nine years ago, I had little interest in regulation and no teaching or research experience. I soon learned that regulation was a priority area of work at the Council of Economic Advisers. The Council was active in advocating less regulation of surface freight transportation, commercial airlines and natural gas production. The Council was also conducting analysis of the newly-emerging environmental regulations. I first was exposed to the Council's regulatory analysis while I was on the staff. After I became a member, a major part of my responsibility was to coordinate the Council's regulatory analysis and represent the Council inside and outside government. Unfortunately, the amount of work which was needed greatly exceeded the capacity of the Council's small staff of two professionals in this area. This was especially true since new regulatory programs and requirements were proliferating rapidly in the early 1970s. During the past four years I have been deeply involved in establishing a new regulatory agency which oversees commodity futures trading. My remarks today, therefore, will be from my experience as a regulator-from the inside, so to speak. The Commodity Futures Trading Commission (CFTC) was created by Congress in 1974 when commodity markets were exceptionally turbulent. In addition, establishing new federal regulatory programs was fashionable during this period. Even though Congress is more skeptical about starting new regulatory programs today, I believe they would have to establish the CFTC now if they had not already done so. I know Congress considers effective regulation of futures trading to be desirable and essential for the protection of the hedging and pricing functions of futures markets as well as for the protection of those who use the markets. Let me make four general observations based upon my experience as a CFTC Commissioner. I hope my perspective will help you determine how to get a handle on regulatory research, which is not an easy task.

A Regulator's Perspective on Regulatory Research

nounced one year ago came at a time when there were serious conflicts between the objectives of macroeconomic policy and the means of achieving those objectives. The performance of the economy-measured in the macro variables of aggregate economic activity, inflation, and the balance of payments-was unsatisfactory. But at the same time the conventional tools of fiscal and monetary policy that would help the economy achieve one objective would worsen the situation for one or both of the other objectives. The combination of domestic unemployment and inflation far beyond the boundaries of recent experience and a deteriorating balance of payments are well known even if the current state of knowledge does not allow economists to explain them fully. The unexpected "freeze" of domestic prices and wages was combined with equally surprising and provocative international policies. It has been stated that the announcement to suspend the dollar's convertibility into gold and other re

Gary L. Seevers

Papers

An Evaluation of the Disincentive Effect Caused by P. L. 480 Shipments

Food Policy: Implications for the Food Industry

Food Policy Issues in the United States

A Regulator's Perspective on Regulatory Research

The Policy Environment for U. S. Agricultural Trade