Food-for-Work versus Cash-for-Work: Emergency Assistance in Palestine

In this paper we analyse the provision of emergency assistance ( food assistance, cash transfers, employment programmes, etc) to a country whose economy has been decimated since the start of the second intifada. We try to simulate the different potential effects brought about by these different policies and, in particular, to draw some policy implications concerning the Food-for-Work versus Cash-for-Work debate. To that end we have constructed a general equilibrium model of the Palestinian economy that we calibrate on the (pre-intifada) Social Accounting Matrix (SAM) of 1998. We give a so-called ‘intifada-shock’ to construct a counterfactual ‘post-intifada’ SAM which serves as basis for our policy simulations. We show that monetary aid from abroad is to be preferred to food aid from abroad. We argue that a labour-oriented approach (subsidizing the most labour-intensive sectors) is to be preferred to a welfare-oriented approach where the subsidized sectors produce those goods that dominate the consumption basket.