The Egyptian food subsidy system: Operation and effects on income distribution

This paper examines the effect of the Egyptian food subsidy system on income distribution. The system now includes only bread, wheat flour, sugar and oil. Even though these four subsidized foods are basically available to all Egyptians, this study finds that the system is ''self-targeted'' to the poor because it subsidizes ''inferior foods.'' Results of a new ''food characteristic demand system'' show that two of the four subsidized foods - bread and sugar - are inferior foods. Egyptian food subsidies thus have a positive impact on income distribution. When food subsidies are not included in expenditures, the Gini coefficient rises by 3.7% in urban areas and by 1.2% in rural areas. Copyright (C) 1996 Elsevier Science Ltd