Those that live in poverty spend differently than those with a higher income. In general, poorer individuals have a higher marginal propensity to consume and spend a majority of their income on food. The ability to afford food provides greater health and well being. Poorer countries often use subsidies to make food prices artificially low, but governments may find that subsidizing food costs for buyers can have significant benefits.
Subsidizing food costs can push the supply or demand side of the market. When food subsidies go to farmers supply is pushed out; when they go to consumers, demand shifts out. In places where much of the food consumed comes from domestic production, farm subsidies help farmers keep up with costs. This aids the producers and keeps food prices low, but the efforts do not target those that have trouble affording a meal. Relative to the poor, individuals with a higher income are less likely to change their food bundle due to changes in price. The United States implements all food subsidies through the farm bill composed of farm subsidies and the Food Stamp Program. As cited in Feeding Expectations, Egypt and the Philippines both channel less than 20% of all food subsidies to poor households. In the United States, about 80% of the farm bill goes towards the Food Stamp Program. Allowing funds to go towards lower income consumers should allow poorer families to purchase healthier food and more of it. Research found that food vouchers were also the most cost effective per dollar amount. Subsidies push out the equilibrium quantity of commodities sold in the market. There are costs and benefits that come from both subsidies.
In theory, pushing out the supply side will lower the price of food and allow others to enter into the market. But the market for food does not sound like something anyone should be excluded from. Food stamps, vouchers, increase the demand for food, raising the price. This should be good for farmers whom now receive a higher marginal revenue, price per unit sold. While helpful, the amount could go to better use. Vouchers are cheaper than cash handouts and more effective and encouraging a healthy diet. This will allow more low income families a greater budget for food and other goods. Food stamps are a way of targeting poverty, provide an avenue for the poor to receive a higher real income. The ability to properly implement food stamps could decrease inequality and reduce poverty. Poorer countries should start vouching for their consumers.
