Working Paper: CEPR ID: DP8581
Authors: Jesse Cunha; Giacomo De Giorgi; Seema Jayachandran
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.
Keywords: cash transfers; inkind transfers; prices
JEL Codes: D4; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cash transfers (F16) | Increase demand for normal goods (D12) |
| Increase demand for normal goods (D12) | Increase prices in local economy (E30) |
| Inkind transfers (F16) | Increase local supply (R31) |
| Increase local supply (R31) | Decrease prices for transferred goods (F16) |
| Cash transfers (F16) | Increase prices for normal goods (E31) |
| Inkind transfers (F16) | Decrease prices compared to cash transfers (F16) |
| Cash transfers (F16) | Shift wealth between producers and consumers (D16) |
| Inkind transfers (F16) | Broader impact on market prices (G19) |