Food Aid, Trade and Welfare

We study how the design of food assistance programs shapes aid recipients’ consumption, secondary-market trade and prices. Exploiting the World Food Programme’s (WFP) transition from in-kind food aid to e-vouchers across Rohingya refugee camps in Cox’s Bazar, Bangladesh, we document three findings. First, evoucher recipients achieve the same caloric intake as in-kind recipients but spend more on non-food items not provided by WFP, revealing binding non-food constraints. Second, e-vouchers increase rice trade in secondary resale markets, consistent with rice having high consumption -and intrinsic liquidity- value. Third, we document price dispersion in secondary markets, with median resale prices below primary-market prices, implying a redistribution of value from sellers to buyers. We rationalize these patterns with a model of consumption choice in which food aid trade is an efficient response to unmet consumption needs. The model shows that e-vouchers and secondary-market trade jointly improve flexibility and allocative efficiency leading to welfare gains.