THE POTENTIAL AND LIMITATIONS OF SELF-TARGETED FOOD SUBSIDIES

Can self-selection of subsidized commodities be used as a mechanism to transfer income to the poor? Evidence from two self-targeting program s, one in South Africa and one in Tunisia, shows that although self-ta rgeting can clearly improve the distribution of food subsidies to the poorest members of society, its power to alleviate poverty and reduce income disparities is limited by preference patterns, income inequalit y, and the size of the individual subsidies. Self-targeting through qu ality and product differentiation can be a useful means to reform exis ting universal subsidy schemes, but it should be considered a transiti onal tool while the capacity for implementing more precise mechanisms is developed.