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Is the Cure Worse than the Disease? Unintended Effects of Payment Reform in a Quantity-based Transfer Program

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  • Katherine Meckel

Abstract

Quantity vouchers are used in redistributive programs to shield participants from price variation and alter their consumption patterns. However, because participants are insensitive to prices, vendors of program goods are incentivized to price discriminate between program and non-program customers. I study these trade-offs in the context of a reform to reduce price discrimination in the Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides a quantity voucher for nutritious foods to low-income mothers and children. The reform caused vendors to drop out, reducing program take-up. In addition, smaller vendors increased prices charged to non-WIC shoppers by 6.4%.

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  • Katherine Meckel, 2020. "Is the Cure Worse than the Disease? Unintended Effects of Payment Reform in a Quantity-based Transfer Program," NBER Working Papers 26725, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26725
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    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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