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The Impacts of Cash and In-Kind Transfers on Consumption and Labor Supply: Experimental Evidence from Rural Mexico

  • Skoufias, Emmanuel


    (The World Bank)

  • Gonzalez-Cossio, Teresa

    (The World Bank)

The authors use the unique experimental design of the Food Support Program (Programa Apoyo Alimentario) to analyze in-kind and cash transfers in the poor rural areas of southern states of Mexico. They compare the impacts of monthly in-kind and cash transfers of equivalent value (mean share 11.5 percent of pre-program consumption) on household welfare as measured by food and total consumption, adult labor supply, and poverty. The results show that approximately two years later the transfer has a large and positive impact on total and food consumption. There are no differences in the size of the effect of transfer in cash versus transfers in-kind on consumption. The transfer, irrespective of type, does not affect overall participation in labor market activities but induces beneficiary households to switch their labor allocation from agricultural to nonagricultural activities. The analysis finds that the program leads to a significant reduction in poverty. Overall, the findings suggest that the Food Support Program intervention is able to relax the binding liquidity constraints faced by poor agricultural households, and thus increases both equity and efficiency.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4778.

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Length: 51 pages
Date of creation: 01 Nov 2008
Date of revision:
Handle: RePEc:wbk:wbrwps:4778
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  1. M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers 95-4, Brown University, Department of Economics.
  2. Michael P. Murray, 1978. "A Reinterpretation of the Traditional Income-Leisure Model, with Application to In Kind Subsidy Programs," Working Papers 307, Queen's University, Department of Economics.
  3. Taylor, J. Edward & Dyer, George A. & Yunez-Naude, Antonio, 2005. "Disaggregated Rural Economywide Models for Policy Analysis," World Development, Elsevier, vol. 33(10), pages 1671-1688, October.
  4. Gahvari, Firouz, 1994. "In-kind transfers, cash grants and labor supply," Journal of Public Economics, Elsevier, vol. 55(3), pages 495-504, November.
  5. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-417, November.
  6. Emmanuel Skoufias & Vincenzo Di Maro, 2008. "Conditional Cash Transfers, Adult Work Incentives, and Poverty," Journal of Development Studies, Taylor & Francis Journals, vol. 44(7), pages 935-960.
  7. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  8. Paul J. Gertler & Sebastian W. Martinez & Marta Rubio-Codina, 2012. "Investing Cash Transfers to Raise Long-Term Living Standards," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 164-92, January.
  9. 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.
  10. Paul Schultz, T., 2004. "School subsidies for the poor: evaluating the Mexican Progresa poverty program," Journal of Development Economics, Elsevier, vol. 74(1), pages 199-250, June.
  11. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  12. Carlo Del Ninno & Paul Dorosh, 2003. "Impacts of in-kind transfers on household food consumption: Evidence from targeted food programmes in Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 40(1), pages 48-78.
  13. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719, July.
  14. Leonesio, Michael V, 1988. "In-Kind Transfers and Work Incentives," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 515-29, October.
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