Discussion paper

DP15844 In-Kind Transfers as Insurance

In-kind transfers can provide insurance benefits when prices of consumption goods vary, as is common in developing countries. We develop a model demonstrating that in-kind transfers are welfare improving to beneficiaries relative to cash if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a marginal utility proxy, we find that in-kind transfers are preferred for low-income Indian households. Expansions in India's flagship in-kind food transfer program not only increase caloric intake but also reduce caloric sensitivity to prices. Our results contribute to ongoing debates about the optimal form of social protection programs.

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Citation

Gadenne, L, M Singhal, S Sukhtankar and S Norris (eds) (2022), “DP15844 In-Kind Transfers as Insurance”, CEPR Press Discussion Paper No. 15844. https://cepr.org/publications/dp15844-0