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The Price Effects of Cash Versus In-Kind Transfers
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In this paper, the authors compare how cash and in-kind transfers affect local prices, and show that inkind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers.Abstract:
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.read more
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