The Price Effects of Cash Versus In-Kind Transfers

Jesse M. Cunha, Giacomo De Giorgi, Seema Jayachandran

Research output: Contribution to journalArticlepeer-review

76 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)240-281
Number of pages42
JournalReview of Economic Studies
Volume86
Issue number1
DOIs
StatePublished - Jan 1 2019

Keywords

  • Cash
  • General equilibrium
  • In-kind
  • Price effects
  • Welfare transfers

ASJC Scopus subject areas

  • Economics and Econometrics

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