Journal
AMERICAN ECONOMIC REVIEW
Volume 98, Issue 4, Pages 1553-1577Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/aer.98.4.1553
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Funding
- NIA NIH HHS [R01 AG020994-03, R01 AG020994-05, R01 AG020994-04, R01 AG020994-02, R01 AG020994-01A1] Funding Source: Medline
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This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staplesfor extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns. We find that their elasticity of demand depends significantly, and nonlinearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.
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