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The Price Effects of Cash Versus In-Kind Transfers

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  • De Giorgi, Giacomo
  • Jayachandran, Seema
  • Cunha, Jesse

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.

Suggested Citation

  • De Giorgi, Giacomo & Jayachandran, Seema & Cunha, Jesse, 2011. "The Price Effects of Cash Versus In-Kind Transfers," CEPR Discussion Papers 8581, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8581
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    More about this item

    Keywords

    Cash and in-kind transfers; Prices;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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