Working Paper: NBER ID: w13557
Authors: Janet Currie; Firouz Gahvari
Abstract: We review theoretical explanations for in-kind transfers in light of the limited empirical evidence. After reviewing the traditional paternalistic arguments, we consider explanations based on imperfect information and self-targeting. We then discuss the large literature on in-kind programs as a way of improving the efficiency of the tax system and a range of other possible explanations including the "Samaritan's Dilemma", pecuniary effects, credit constraints, asymmetric information amongst agents, and political economy considerations. Our reading of the evidence suggests that paternalism and interdependent preferences are leading overall explanations for the existence of in-kind transfer programs, but that some of the other arguments may apply to specific cases. Political economy considerations must also be part of the story.
Keywords: in-kind transfers; cash transfers; paternalism; interdependent preferences; tax efficiency; self-targeting
JEL Codes: H4; H5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| paternalism (I38) | in-kind transfers (H49) |
| interdependent preferences (D10) | in-kind transfers (H49) |
| in-kind transfers (H49) | consumption choices of recipients (D12) |
| society prefers recipients to consume certain goods (P36) | in-kind transfers (H49) |
| in-kind transfers (H49) | negative externalities (D62) |
| paternalism (I38) | consumption choices of recipients (D12) |
| in-kind transfers (H49) | tax efficiency (H21) |
| in-kind transfers (H49) | labor supply distortions (J79) |
| in-kind transfers (H49) | long-run labor productivity (J24) |
| self-targeting nature of in-kind transfers (H53) | targeting efficiency (D61) |
| low quality goods (L15) | deadweight losses (H21) |