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The Price Effects of Cash Versus In-Kind Transfers

Jesse M Cunha, Giacomo De Giorgi and Seema Jayachandran

Review of Economic Studies, 2019, vol. 86, issue 1, 240-281

Abstract: This article examines the effect of cash versus in-kind transfers on local prices. Both types of transfers increase the demand for normal goods; in-kind transfers also increase supply in recipient communities, which could lead to lower prices than under cash transfers. We test and confirm this prediction using a programme in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. We find that prices are significantly lower under in-kind transfers compared to cash transfers; relative to the control group, in-kind transfers cause a 4% fall in prices while cash transfers cause a positive but negligible increase in prices. In the more economically developed villages in the sample, households’ purchasing power is only modestly affected by these price effects. In the less developed villages, the price effects are much larger in magnitude, which we show is due to these villages being less tied to the outside economy and having less competition among local suppliers.

Keywords: General equilibrium; Price effects; Cash; In-kind; Welfare transfers (search for similar items in EconPapers)
JEL-codes: D50 O12 I38 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: The price effects of cash versus in-kind transfers (2015) Downloads
Working Paper: The Price Effects of Cash Versus In-Kind Transfers (2011) Downloads
Working Paper: The Price Effects of Cash Versus In-Kind Transfers (2011) Downloads
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