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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.

Suggested Citation

  • Jesse M. Cunha & Giacomo De Giorgi & Seema Jayachandran, 2011. "The Price Effects of Cash Versus In-Kind Transfers," NBER Working Papers 17456, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17456
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    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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