|Institution:||University of Oslo|
|Full text PDF:||https://www.duo.uio.no/handle/10852/17061
Venezuela’s current government, presided by Mr. Hugo Chavez, provides food products at subsidized prices through fair price shops called Mercal. The government claims to have reduced poverty from 60% to approximately 30% (Chavez, 2009). For this reason this paper describes and analyzes Venezuela’s antipoverty food subsidy program, and attempts to answer the following questions: Are food subsidies an efficient antipoverty policy? How does the government target food subsidies? Who benefits from them? Why does the Venezuelan government prefer food subsidies to money transfers? Are there any political objectives? To answer them I first discuss food subsidies as an antipoverty-policy using standard microeconomic arguments. Thereafter I discuss how the government may use Mercal Shops subsidies to secure political power in a divided society such as Venezuela. To frame the arguments, I build on a political economy model by Robinson and Torvik (2009). And I show how this self-targeted food subsidy can be used to win support from the swing voters in Venezuela.