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In-Kind Transfers as Insurance

Author

Listed:
  • Lucie Gadenne
  • Samuel Norris
  • Monica Singhal
  • Sandip Sukhtankar
Abstract
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.

Suggested Citation

  • Lucie Gadenne & Samuel Norris & Monica Singhal & Sandip Sukhtankar, 2021. "In-Kind Transfers as Insurance," NBER Working Papers 28507, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28507
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    References listed on IDEAS

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    Cited by:

    1. Nicholas Li, 2021. "In-kind transfers, marketization costs and household specialization: Evidence from Indian farmers," Working Papers tecipa-700, University of Toronto, Department of Economics.
    2. Negi, Digvijay S., 2022. "Global food price surge, in-kind transfers and household welfare: Evidence from India," World Development, Elsevier, vol. 158(C).
    3. Berkouwer, Susanna B. & Biscaye, Pierre E. & Puller, Steven & Wolfram, Catherine D., 2022. "Disbursing emergency relief through utilities: Evidence from Ghana," Journal of Development Economics, Elsevier, vol. 156(C).
    4. Tagliati, Federico, 2022. "Welfare effects of an in-kind transfer program: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 154(C).
    5. Susanna B. Berkouwer & Pierre E. Biscaye & Eric Hsu & Oliver W. Kim & Kenneth Lee & Edward Miguel & Catherine Wolfram, 2021. "Money or Power? Financial Infrastructure and Optimal Policy," NBER Working Papers 29086, National Bureau of Economic Research, Inc.
    6. Mastrorillo, Marina & Scognamillo, Antonio & Ginet, Camille & Pietrelli, Rebecca & d’Errico, Marco & Ignaciuk, Adriana, 2022. "Enhancing refugees’ self-reliance in Uganda – The role of cash and food assistance," ESA Working Papers 324702, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    7. repec:ags:aaea22:335954 is not listed on IDEAS
    8. Berkouwer, Susanna & Biscaye, Pierre & Hsu, Eric & Kim, Oliver & Lee, Kenneth & Miguel, Edward & Wolfram, Catherine, 2023. "Money or Power? Choosing Covid-19 aid in Kenya," Energy Economics, Elsevier, vol. 127(PB).

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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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