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The Freedom to Choose: Theory and Quasi-Experimental Evidence on Cash Transfer Restrictions

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  • Jade Siu
  • Olivier Sterck
  • Cory Rodgers

Abstract

Should cash transfer programmes restrict consumer choice? For example, should food assistance delivered in cash be restricted to food and exclude temptation goods? Theoretically, if transfers are extra-marginal, restrictions induce (1) a substitution effect away from restricted goods and (2) a negative wealth effect if transfer recipients resell unrestricted goods at a loss to access restricted goods. The welfare impact on transfer recipients is negative. We test and corroborate these predictions by exploiting a natural experiment in a refugee settlement in Kenya, where some refugees receive monthly cash transfers restricted to food while others get unrestricted cash transfers.

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  • Jade Siu & Olivier Sterck & Cory Rodgers, 2021. "The Freedom to Choose: Theory and Quasi-Experimental Evidence on Cash Transfer Restrictions," CSAE Working Paper Series 2021-14, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2021-14
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    More about this item

    Keywords

    Cash transfers; Vouchers; Restrictions; Debt;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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