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The Price Effects of Cash Versus In-Kind Transfers

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  • Jesse M. Cunha
  • Giacomo De Giorgi
  • Seema Jayachandran

Abstract

This paper compares how cash and in-kind transfers affect local prices. Both types of transfers increase the demand for normal goods, but only in-kind transfers also increase supply. Hence, in-kind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers. We test and confirm this prediction using a program in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. The pecuniary benefit to consumers of in-kind transfers, relative to cash transfers, equals 11% of the direct transfer.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17456.

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Date of creation: Sep 2011
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Handle: RePEc:nbr:nberwo:17456

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References

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  1. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," Working Papers 1012, Queen's University, Department of Economics.
  2. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
  3. Seema Jayachandran, 2006. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 538-575, June.
  4. Jesse Cunha, 2010. "Testing Paternalism: Cash vs. In-kind Transfer in Rural Mexico," Discussion Papers 09-021, Stanford Institute for Economic Policy Research.
  5. Simon GB Cowan & Simon Cowan, 2004. "Demand shifts and imperfect competition," Economics Series Working Papers 188, University of Oxford, Department of Economics.
  6. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-83, June.
  7. Stephen Coate, 1987. "Cash Versus Direct Food Relief," Discussion Papers 724R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Étienne Gilbert, 1994. "Banque mondiale, World Development Report 1994, Infrastructure for development," Revue Tiers Monde, Programme National Persée, vol. 35(140), pages 939-939.
  9. Joseph P. Kaboski & Robert M. Townsend, 2011. "A Structural Evaluation of a Large‐Scale Quasi‐Experimental Microfinance Initiative," Econometrica, Econometric Society, vol. 79(5), pages 1357-1406, 09.
  10. McKelvey, Christopher, 2011. "Price, unit value, and quality demanded," Journal of Development Economics, Elsevier, vol. 95(2), pages 157-169, July.
  11. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
  12. de Janvry, Alain & Fargeix, Andre & Sadoulet, Elisabeth, 1991. "The political feasibility of rural poverty reduction," Journal of Development Economics, Elsevier, vol. 37(1-2), pages 351-367, November.
  13. Murray, Michael P, 1999. "Subsidized and Unsubsidized Housing Stocks 1935 to 1987: Crowding Out and Cointegration," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 107-24, January.
  14. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
  15. James Levinsohn & Margaret McMillan, 2007. "Does Food Aid Harm the Poor? Household Evidence from Ethiopia," NBER Chapters, in: Globalization and Poverty, pages 561-598 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Robinson, Sherman & Levy, Stephanie, 2014. "Can cash transfers promote the local economy? A case study for Cambodia:," IFPRI discussion papers 1334, International Food Policy Research Institute (IFPRI).
  2. Baird, Sarah & Bohren, Aislinn & McIntosh, Craig & Ozler, Berk, 2014. "Designing experiments to measure spillover effects," Policy Research Working Paper Series 6824, The World Bank.
  3. Mohammed, Essam, 2011. "Pro-poor benefit distribution in REDD+: Who gets what and why does it matter?," MPRA Paper 43648, University Library of Munich, Germany.
  4. Hoddinott, John & Sandstrom, Susanna & Upton, Joanna, 2013. "The impact of cash and food transfers: Evidence from a randomized intervention in Niger," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149919, Agricultural and Applied Economics Association.
  5. Clément Imbert & John Papp, 2012. "Equilibrium Distributional Impacts of Government. Employment Programs: Evidence from India's Employment Guarantee," PSE Working Papers halshs-00680451, HAL.
  6. Mahadevan, Renuka & Suardi, Sandy, 2013. "Is there a role for caste and religion in food security policy? A look at rural India," Economic Modelling, Elsevier, vol. 31(C), pages 58-69.
  7. Margolies, Amy & Hoddinott, John, 2012. "Mapping the Impacts of Food Aid: Current Knowledge and Future Directions," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. repec:fpr:export:1341 is not listed on IDEAS
  9. Hidrobo, Melissa & Hoddinott, John F. & Peterman, Amber & Margolies, Amy & Moreira, Vanessa, 2012. "Cash, food, or vouchers?: Evidence from a randomized experiment in northern Ecuador," IFPRI discussion papers 1234, International Food Policy Research Institute (IFPRI).
  10. Clement Imbert & John Papp, 2013. "Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee," Economics Series Working Papers WPS/2013-03, University of Oxford, Department of Economics.
  11. repec:hal:wpaper:halshs-00680451 is not listed on IDEAS
  12. Donald F. Larson & Julian Lampietti & Christophe Gouel & Carlo Cafiero & John Roberts, 2014. "Food security and storage in the Middle East and North Africa," Working Papers 253354, Institut National de la Recherche Agronomique, France.
  13. Hoddinott, John F. & Sandström, Susanna & Upton, Joanna, 2014. "The impact of cash and food transfers: Evidence from a randomized intervention in Niger:," IFPRI discussion papers 1341, International Food Policy Research Institute (IFPRI).
  14. Schwab, Benjamin, 2013. "In the form of bread? A randomized comparison of cash and food transfers in Yemen," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150448, Agricultural and Applied Economics Association.
  15. Michael Christian Lehman, 2014. "Long-Run Effects Of Conditional Cash Transfers," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 223, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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