Working Paper: CEPR ID: DP15844
Authors: Lucie Gadenne; Monica Singhal; Sandip Sukhtankar; Sam Norris
Abstract: 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.
Keywords: inkind transfers; cash transfers; price risk; public distribution system; India
JEL Codes: H42; H53; I38; O12; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inkind transfers (F16) | welfare improvement (I38) |
| marginal utility of income increases in high-price states (D11) | households prefer inkind transfers (H53) |
| 10% increase in price of rice (Q11) | 11 percentage point decrease in likelihood of meeting MCR (C34) |
| expansions in PDS (P30) | 10.7 percentage point increase in likelihood of meeting MCR (C21) |
| PDS reduces caloric sensitivity to prices (D12) | substantial insurance against price risk (G52) |