FIGHTING POVERTY AND CHILD MALNUTRITION: ON THE DESIGN OF FOREIGN AID POLICIES

This paper investigates how the different food aid programs affect economic development via their effect on the parental trade-off between the number of children and the investment in each child's human capital. This is done in an OLG framework where parents decide on the number of children and the nutrition and secondary schooling of each child. Primary schooling is mandatory. Providing school meals locks countries with no children attending secondary schooling into poverty by reducing the private (nutrition) cost per child. In countries where parents find it optimal to enroll children in secondary schooling, food aid increases the marginal benefit of schooling. Consequently, school feeding programs are conducive to economic development in these countries. If food aid is in the form of a food price subsidy, we show that child nutrition and thus children's human capital increase unambiguously. Although fertility and schooling are not directly affected, a sufficiently high subsidy rate will induce parents to begin to enroll children into secondary schooling by the assumed complementarity between nutrition and schooling in the human capital production function. If the food aid program provides a fixed amount of food per child, this decreases the marginal benefit of parental nutritional investments; therefore, it leads to higher fertility and to lower total provision of nutrition per child.