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GTAP Resource #1306

"Food-for-work versus Cash-for-work: Emergency Assistance in Palestine"
by Missaglia, Marco and Paul De Boer

In this paper we analyse, in the context of the Palestinian economy and with the help of a computable general equilibrium model, a typical “emergency” issue in developing countries, namely the choice between food-for-work (FFW) and cash-for-work (CFW) programs.
Many recent studies are focused on the so-called “final status” issues, i.e. trade and labour policy options for the Palestinian economy once a peace agreement with Israel will be reached. Here we shift our attention towards a somewhat more urgent problem, the provision of emergency assistance to a country whose economy has been decimated since the start of the second intifada. Emergency assistance may take a number of forms: budget support, food assistance, cash transfers, employment programs, etc.
In the paper we try to simulate the different potential effects brought about by each of these different policies and, especially, to draw some policy implications concerning the FFW vs. CFW debate: should the workers participating in an employment program be paid in cash or in food and other essentials? In essence, this is a general equilibrium choice. Take for instance a FFW program where food is imported (which is often the case in Palestine).The injection of food assistance from abroad can be thought of as a reduction of the price of imported food relative to the price of locally produced food. This, in turn, will change both the level and the composition of food demand (think of “food” as an Armington composite of imported and domestically produced food): people will switch from domestically produced to imported food. At the same time, however, the overall reduction in the price of the food composite (whose demand is generally income-inelastic) is likely to encourage households to consume more non-food products. Which products? What are the consequences at the macro level? Who will ultimately enjoy the benefits and bear the burden? The effects of an employment program go far beyond its direct beneficiaries, and the computable general equilibrium model of the Palestinian economy presented in our paper is intended to understand at least some of the indirect and less straightforward implications of such emergency policies.
The model is calibrated on data derived from the 1998 SAM of the Palestinian economy, the 1998 household survey, and on data on labour statistics and on transfers from abroad pertaining to 2001.

Resource Details (Export Citation) GTAP Keywords
Category: 2003 Conference Paper
Status: Published
By/In: Presented at the 6th Annual Conference on Global Economic Analysis, The Hague, The Netherlands
Date: 2003
Created: (5/5/2003)
Updated: Bacou, M. (5/18/2003)
Visits: 2,443
- Economic development
- Middle East

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