DP8581 The Price Effects of Cash Versus In-Kind Transfers
|Author(s):||Jesse Cunha, Giacomo De Giorgi, Seema Jayachandran|
|Publication Date:||September 2011|
|Keyword(s):||Cash and In-Kind Transfers, Prices|
|Programme Areas:||Development Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8581|
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.