In-Kind Transfers as Insurance

Lucie Gadenne, Samuel Norris, Monica Singhal and Sandip Sukhtankar

No 28507, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent debates about the optimal form of social protection programs have highlighted the potential for cash as the preferred form of transfer to low income households. However, in-kind transfers remain prevalent throughout the world. We argue that beneficiaries themselves may prefer in-kind transfers because these transfers can provide insurance against price risk. Households in developing countries often face substantial price variation as a result of poorly integrated markets. We develop a model demonstrating that in-kind transfers are welfare improving relative to cash if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a proxy for marginal utility, we find that in-kind transfers improve welfare relative to cash for Indian households, an effect driven entirely by poor households. We further show that expansions in the generosity of the Public Distribution System (PDS)—India’s in-kind food transfer program—result not only in increased caloric intake but also reduced sensitivity of calories to prices.

JEL-codes: H42 H53 I38 O12 Q18 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ias and nep-upt
Note: DEV PE
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Citations: View citations in EconPapers (9)

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Journal Article: In-Kind Transfers as Insurance (2024)
Working Paper: In-Kind Transfers as Insurance (2022)
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