Do Consumer Price Subsidies Really Improve Nutrition?

In this paper results are analysed from a field experiment exploring the response of poor households in China to food price subsidies. Many developing countries use food price subsidies or price controls to improve the nutrition of the poor. However, subsidizing goods on which households spend a high proportion of their budget can create large wealth effects. Consumers may then substitute towards foods with higher non-nutritional attributes like taste, but lower nutritional content per unit currency, weakening or perhaps even reversing the intended impact of the subsidy. The paper presents data from a randomized program of large price subsidies for poor households in two provinces of food nutritent, China.