Skip to main content Accessibility help


  • Pawan Gopalakrishnan (a1) and Anuradha Saha (a2)


We investigate the sectoral and the distributional effects of a food subsidy program, where food consumption in the economy is subsidized by taxing the manufacturing good producers. In a two-agent model comprising of farmer and industrialist households, agents consume food to accumulate health. Simulations indicate that while the subsidy program increases food output and agents’ health both in the short run and the long run, manufacturing output and aggregate real GDP appear to fall in the short run and increase only in the long run. The program does not make both agents better off and exhibits social welfare gains for a limited range of subsidies.


Corresponding author

Address correspondence to: Ashoka University, Sonepat – 131029. E-mail: Telephone: +91 9582370588.


Hide All

We thank Chetan Ghate, Satya P. Das, Amartya Lahiri, Alok Johri, Thomas Seegmuller, Luca Gori, Mauro Sordini, Angelo Antoci, two anonymous referees, and participants from NED-CICSE 2017, the LKYSPP Development Economics and Policy (DeEP) Conference, the 2015 Australasian Development Economics Workshop, the 10th Annual Conference on Economic Growth and Development (ISI Delhi), and the 14th PET Meetings (Seattle) for insightful comments. Views expressed in this paper are personal.



Hide All
Arora, Suchit (2001) Health, human productivity, and long-term economic growth. The Journal of Economic History, 61, 699749.
Azam, Mehtabul (2013) Intergenerational occupational mobility in India. Available at SSRN 2287215.
Banerjee, Abhijit, Hanna, Rema, Kyle, Jordan, Olken, Benjamin A., Sumarto, Sudarno. (2018) Tangible information and citizen empowerment: Identification cards and food subsidy programs in Indonesia. Journal of Political Economy, 126, 451491.
Barrett, Christopher B (2002) Chapter 40 food security and food assistance programs. In Agricultural and Food Policy, In Handbook of Agricultural Economics, Volume 2, 21032190. Elsevier.
Barro, Robert J (2013) Health and economic growth. Annals of Economics and Finance, 14, 329366.
Besley, Timothy, Kanbur, Ravi (1988) Food subsidies and poverty alleviation. The Economic Journal, 98, 701719.
Bhattacharya, Rudrani, Patnaik, Ila (2016) Financial inclusion, productivity shocks, and consumption volatility in emerging economies. The World Bank Economic Review, 30, 171201.
Blanden, Jo (2013) Cross-country rankings in intergenerational mobility: A comparison of approaches from economics and sociology. Journal of Economic Surveys, 27, 3873.
Bloom, David E, Canning, David, Sevilla, Jaypee (2004) The effect of health on economic growth: A production function approach. World Development, 32, 113.
Bo, Simona, Ciccone, Giovannino, Guidi, Sabrina, Gambino, Roberto, Durazzo, Marilena, Gentile, Luigi, Cassader, Maurizio, Cavallo-Perin, Paolo, Pagano, Gianfranco (2008) Diet or exercise: What is more effective in preventing or reducing metabolic alterations? European Journal of Endocrinology, 159, 685691.
Chakraborty, Shankha, Papageorgiou, Chris, Fidel Pérez Sebastián. (2016) Health cycles and health transitions. Macroeconomic Dynamics, 20, 189213.
Curioni, C C, Lourenco, P M (2005) Long-term weight loss after diet and exercise: A systematic review. International Journal Of Obesity, 29, 11681174.
Demeke, Mulat, Pangrazio, Guendalina, Maetz, Materne (2009) Country responses to the food security crisis: Nature and preliminary implications of the policies pursued.
Deolalikar, Anil B (1988) Nutrition and labor productivity in agriculture: Estimates for rural South India. The Review of Economics and Statistics, 70, 406413.
Dholakia, Ravindra H, Agarwalla, Astha, Bashir Bazaz, Amir, Agarwal, Prasoon. (2009) Trends in technical progress in India analysis of input-output tables from 1968 to 2003. Working Paper No. 2009-11-02, Indian Institute of Management, Ahmedabad.
Dutta, Bhaskar, Ramaswami, Bharat (2004) Reforming food subsidy schemes: Estimating the gains from self-targeting in India. Review of Development Economics, 8, 309324.
Edwards, Terri (2018) Healthy Weight Loss = 80% Nutrition + 20% Exercise. URL:
FAO, IFAD, UNICEF, WFP, WHO (2017) The State of Food Security and Nutrition in the World 2017. Building resilience for peace and food security. Food and Agriculture Organization of the United Nations, Rome.
Fogel, Robert W (2004) Health, nutrition, and economic growth. Economic Development and Cultural Change, 52, 643658.
Gabriel, Vasco, Levine, Paul, Pearlman, Joseph, Yang, Bo (2012) An estimated DSGE model of the Indian economy. In The Oxford Handbook of the Indian Economy (ed. Ghate, Chetan), Oxford University Press, Chap. 29.
Gentilini, Ugo (2015) Revisiting the “Cash versus food” debate: New evidence for an old puzzle? The World Bank Research Observer, 31, 135167.
Ghate, Chetan, Glomm, Gerhard, Liu Streeter, Jialu (2016) Sectoral infrastructure investments in an unbalanced growing economy: The case of potential growth in India. Asian Development Review, 33, 144166.
Honohan, Patrick (2006) Household Financial Assets in the Process of Development. The World Bank.
Honohan, Patrick (2008) Cross-country variation in household access to financial services. Journal of Banking & Finance, 32, 24932500.
India Budget (2018) Expenditure Profile. URL:
Jiny, Yi, Zengz, Zhixiong (2007) Real estate and optimal public policy in a credit-constrained economy. Journal of Housing Economics, 16, 143166.
Kelly, Mark (2017) Health capital accumulation, health insurance, and aggregate outcomes: A neoclassical approach. Journal of Macroeconomics, 52, 122.
Knuth, Lidija, Vidar, Margaret (2011) Constitutional and Legal Protection of the Right to Food around the World. Food and Agriculture Organization of the United Nations, Rome. Available at
Kotwal, Ashok, Murugkar, Milind, Ramaswami, Bharat (2014) The political economy of food subsidy in India. The Copenhagen Journal of Asian Studies, 30, 100121.
Kozicka, Marta, Kalkuhl, Matthias, Brockhaus, Jan (2017) Food grain policies in India and their implications for stocks and fiscal costs: A dynamic partial equilibrium analysis. Journal of Agricultural Economics, 68, 98122.
Lawler, Moira (2017) Preventing prediabetes: Is diet or exercise more important? URL:
Leal, Darla (2018) Is nutrition more important than exercise? URL:
Madsen, Jakob B. (2018) Health-led growth since 1800. Macroeconomic Dynamics, 22, 9611000.
Mayer, David (2001) The long-term impact of health on economic growth in Latin America. World Development, 29, 10251033.
Mitnitski, Arnold B., Mogilner, Alexander J., MacKnight, Chris, Rockwood, Kenneth. (2002) The accumulation of deficits with age and possible invariants of aging. The Scientific World Journal, 2, 18161822.
Motiram, Sripad, Singh, Ashish (2012) How close does the apple fall to the tree? some evidence from India on intergenerational occupational mobility. Economic and Political Weekly, 47.
Ramaswami, Bharat (2002) Efficiency and equity of food market interventions. Economic and Political Weekly, 11291135.
Rockwood, Kenneth, Mitnitski, Arnold (2007) Frailty in relation to the accumulation of deficits. The Journals of Gerontology: Series A, 62, 722727.
Strauss, John, Thomas, Duncan (2008) Health over the Life Course. In Handbook of Development Economics, Chapter 54, Volume 4, 33753474. Elsevier.
Ter-Minassian, Teresa, Allen, Mark, Johnson, Simon (2008) Food and fuel prices-recent developments, macroeconomic impact, and policy responses. International Monetary Fund Washington, DC: IMF.
Tokarick, Stephen (2008) Dispelling some misconceptions about agricultural trade liberalization. Journal of Economic Perspectives, 22, 199216.
Verma, Rubina (2012) Can total factor productivity explain value added growth in services? Journal of Development Economics, 99, 163177.
Weil, David N (2014) Health and economic growth. In Handbook of Economic Growth, Volume 2, 623682. Elsevier.
Yaniv, Gideon, Rosin, Odelia, Tobol, Yossef (2009) Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy. Journal of Public Economics, 93, 823830.



Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed