Table of Contents Giffen Behavior and Subsistence Consumption Zeckhauser and Two Anonymous Referees for Valuable Comments and Discussions, and I. Giffen Behavior and Consumption among the Poor

This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns. We find that their elasticity of demand depends significantly, and non-linearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor. (JEL D01; I30; O12). * Jensen: Watson Institute for International Studies, Brown University, 111 Thayer St., Providence, RI, 02912 (email: [email protected]) and National Bureau of Economic Research; Miller: John F. Kennedy School of Government, Harvard University, 79 JFK St, Cambridge, MA 02138 (e-mail: [email protected]). We thank Alberto Abadie, Chris Avery, Sebastian Bauhoff, Amitabh Chandra, Suzanne Cooper, Daniel Hojman, Brian Jacob, Elizabeth Lacey, Erzo Luttmer, Mai Nguyen, Albert Park, Rodrigo Wagner, Sangui Wang, Richard Zeckhauser and two anonymous referees for valuable comments and discussions, and Frank Mou, Dulles Wang and Fan Zhang for research assistance. We gratefully acknowledge financial support from the National Institute of Aging, the William F. Milton Fund at Harvard Medical School, the Dean’s Research Fund at the John F. Kennedy School of Government, the Center for International Development at Harvard University, and the Hefner China Fund.