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The Price Effects of Cash Versus In-Kind Transfers

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

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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File URL: http://www.nber.org/papers/w17456.pdf
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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
Note: PE
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  1. Coate, Stephen, 1989. "Cash versus direct food relief," Journal of Development Economics, Elsevier, vol. 30(2), pages 199-224, April.
  2. Seema Jayachandran, 2005. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," UCLA Economics Online Papers 370, UCLA Department of Economics.
  3. McKelvey, Christopher, 2011. "Price, unit value, and quality demanded," Journal of Development Economics, Elsevier, vol. 95(2), pages 157-169, July.
  4. 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.
  5. 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.
  6. 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.
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  8. 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.
  9. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
  10. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2004. "Equilibrium Policy Experiments and the Evaluation of Social Programs," NBER Working Papers 10283, National Bureau of Economic Research, Inc.
  11. Étienne Gilbert, 1994. "Banque mondiale, World Development Report 1994, Infrastructure for development," Revue Tiers Monde, Programme National Persée, vol. 35(140), pages 939-939.
  12. Simon GB Cowan & Simon Cowan, 2004. "Demand shifts and imperfect competition," Economics Series Working Papers 188, University of Oxford, Department of Economics.
  13. 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.
  14. 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.
  15. Jesse Cunha, 2010. "Testing Paternalism: Cash vs. In-kind Transfer in Rural Mexico," Discussion Papers 09-021, Stanford Institute for Economic Policy Research.
  16. Bearse, P. & Glomm, G. & Janeba, E., 2000. "Why poor countries rely mostly on redistribution in-kind," Journal of Public Economics, Elsevier, vol. 75(3), pages 463-481, March.
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