Fighting poverty and child malnutrition: on the design of foreign aid policies

In this paper, we develop a two period overlapping generation model on the effects of child nutrition in developing countries.The model gives rise to multiple equilibria including a poverty trap. We show that child nutrition status affects unfavorably the evolution of human capital and leads countries into poverty. We consider different exogenous foreign aid policies implemented by international organizations such as the World Food Program (WFP). We find that school feeding programs solve social problems like child labor.However, they do not necessarily lead countries to achieve economic development. On the contrary they can lead to poverty if the initial human capital is low. We show that if subsidies are high enough they can prevent a country from going into poverty. Also, we argue that if the WFP provides fixed amount of food to households, then a quality-quantity trade off takes place. Parents decrease the nutrition of their offsprings and increase their number of children.Consequently, total nutrition decreases and the developing country is trickles down and gets locked into poverty trap for any given level of human capital