Abstract
The trade‐offs resulting from the choice of policy alternatives to improve short‐run welfare of poor households in developing countries are examined through a comparison of food subsidies and agricultural production subsidies. Using India as a case study, the analysis is undertaken with an economy‐wide multisector model. Comparing general (untargeted) food and production subsidies, the results show larger real income gains for all food buyers through production subsidies. Targeted food subsidies are more beneficial for the urban poor, while the rural poor benefit more from targeted production subsidies, suggesting the need to use the two subsidies as a joint policy package in the short run.
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