Wednesday, September 28, 2011

Abstracting: The Side Effects of Food Aid

via Chris Blattman:

The Price Effects of Cash Versus In-Kind Transfers 
Jesse M. Cunha, Giacomo De Giorgi, Seema Jayachandran
NBER Working Paper No. 17456
Issued in September 2011
NBER Program(s):   PE  
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.