Global food price surge, in-kind transfers, and household welfare evidence from India

This paper studies the impact of high global food prices on household welfare in India. I use the 2007-08 surge in global food prices and household share of area under rice and wheat at the baseline to show that food cultivating households gain from high prices. These welfare gains mainly accrue to net food producers. I observe that net food producer households were able to maintain their per capita spending and consumption of rice and wheat by decreasing consumption of market purchased rice and wheat and increasing consumption of government- subsidized rice and wheat. Net consumer households, on the other hand, experienced a decline in the total per capita consumption of rice and wheat even though they substituted their market purchases with homegrown produce and subsidized grains. The role of in-kind food transfers in insulating households from high prices was evident for both net producers and consumers. Finally, high prices induced working-age adult males in net food-producing households to increase work days and hours worked per day on their own farm and reallocated labor from market wage work to labor on their own farm.