In-Kind Transfers as Insurance
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Recent debates about the optimal form of social protection programs have highlighted the potential for cash as the preferred form of transfer to low income households. However, in-kind transfers remain prevalent throughout the world. We argue that beneficiaries themselves may prefer in-kind transfers because these transfers can provide insurance against price risk. Households in developing countries often face substantial price variation as a result of poorly integrated markets. We develop a model demonstrating that in-kind transfers are welfare improving relative to cash if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a proxy for marginal utility, we find that in-kind transfers improve welfare relative to cash for Indian households, an effect driven entirely by poor households. We further show that expansions in the generosity of the Public Distribution System (PDS) – India’s in-kind food transfer program – result not only in increased caloric intake but also reduced sensitivity of calories to prices.

Written with S Norris (University of British Columbia), S Sukhtankar (University of Virginia) and M Singal (University of California, Davis)
Date: 3 November 2021, 12:30 (Wednesday, 4th week, Michaelmas 2021)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Lecture Theatre
Speaker: Lucie Gadenne (University of Warwick)
Organising department: Department of Economics
Organiser: Suzanne George (CSAE)
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Part of: CSAE Lunchtime Seminars
Booking required?: Recommended
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Audience: Members of University and CSAE only
Editors: Suzanne George, Fiona Morsia, Annie Rose