Abstract
We estimate the effect of food price subsidy on poverty in Khyber Pakhtunkhwa, Pakistan in this paper. The study uses Linear Approximate Almost Ideal Demand System for the estimation of compensated and uncompensated price and expenditure elasticities of food using Household Integrated Economic Survey. The estimated own and cross price Hicksian elasticities are used for estimating the changes in the quantity of food consumed, expenditure on food and its effect on poverty. The study uses two recent available poverty lines for estimation, showing that the scheme of food price subsidy increase real income of the households which has a decreased poverty state. The analysis shows that the subsidy program marginally decreases poverty in the province. The study recommends targeted food price subsidy for poverty alleviation and eradicating chronic hunger.
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