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Testing Paternalism: Cash vs. In-kind Transfers in Rural Mexico
, 2010
"... Abstract: Welfare programs are often implemented in-kind to promote outcomes that might not be realized under cash transfers. I use a randomized controlled trial of the Mexican government’s Food Assistance Program (‘PAL’) to test whether this form of paternalism is necessary, comparing precisely mea ..."
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Abstract: Welfare programs are often implemented in-kind to promote outcomes that might not be realized under cash transfers. I use a randomized controlled trial of the Mexican government’s Food Assistance Program (‘PAL’) to test whether this form of paternalism is necessary, comparing precisely measured consumption and health outcomes under both inkind food and cash transfers. Importantly, I …nd that households do not indulge in the consumption of vices when handed cash. Furthermore, there is little evidence that the in-kind food transfer induced more food to be consumed than did an equal-valued cash transfer. This result is partly explained by the fact that the in-kind transfer was inframarginal in terms of total food. However, the PAL in-kind basket contained 10 individual items, and these transfers indeed altered the types of food consumed for some households. While this distorting e¤ect of in-kind transfers must be a motivation for paternalism, I …nd that households receiving cash consumed equally nutritious foods. Finally, there were few di¤erences in child nutritional intakes, and no di¤erences in child height, weight, sickness, or anemia prevalence. While other justi…cations for in-kind transfers may certainly apply, there is minimal evidence supporting the paternalistic one in this context.
Moral Hazard and the Composition of Transfers: Theory and Evidence from Cross-Border Transfers
- Economics of Governance
, 2013
"... ABSTRACT We study how a donor can use restricted transfers to control the moral hazard behavior of a recipient and how the composition of unrestricted and restricted transfers is adjusted in response to changes in the moral hazard behavior of the recipient. Under certain conditions, our gametheoret ..."
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Cited by 5 (0 self)
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ABSTRACT We study how a donor can use restricted transfers to control the moral hazard behavior of a recipient and how the composition of unrestricted and restricted transfers is adjusted in response to changes in the moral hazard behavior of the recipient. Under certain conditions, our gametheoretic model predicts that the donor reduces the proportion of restricted transfers in total transfers as the moral hazard behavior of the recipient declines. Using foreign aid transfers (i.e., project aid and program aid) and panel data covering the period 1991-2007, we find econometric support for the prediction of the model. Our results suggest that some variables that affect the size of foreign aid may have no effect on the composition of aid.
Assigning Resources to BudgetConstrained Agents.” Unpublished mimeo
, 2011
"... This article studies different methods of assigning a good to budget-constrained agents. Schemes that assign the good randomly and allow resale may outperform the competitive market in terms of Utilitarian efficiency. The socially optimal mechanism involves random assignment at a discount—an in-kind ..."
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Cited by 4 (1 self)
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This article studies different methods of assigning a good to budget-constrained agents. Schemes that assign the good randomly and allow resale may outperform the competitive market in terms of Utilitarian efficiency. The socially optimal mechanism involves random assignment at a discount—an in-kind subsidy—and a cash incentive to discourage low-valuation individuals from claiming the good.
ABSTRACT Essays on the Political Economy of Redistributive and Allocation Policies in Competitive Democracies
, 2011
"... This dissertation investigates the political incentives for redistribution of in-come and allocation policies in competitive democracies. In Chapter 2, I examine incentives for political redistribution through in-kind transfers. By analyzing the po-litical game between o ¢ ce-motivated politicians a ..."
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This dissertation investigates the political incentives for redistribution of in-come and allocation policies in competitive democracies. In Chapter 2, I examine incentives for political redistribution through in-kind transfers. By analyzing the po-litical game between o ¢ ce-motivated politicians and self-interested citizens, I
rst show that in economies with competitive markets in-kind transfers are not required. Politicians can win elections targeting groups of voters with di¤erential cash transfers. However, in-kind transfers arise in the presence of externalities in consumption. In that case, targeting groups of voters with in-kind rather than cash transfers allows politicians to attract simultaneously voters in additional groups with the same amount of resources. Politicians undertake political redistribution depending on the expected electoral returns obtained from targeting both cash and in-kind transfers into di¤er-ent groups. Furthermore, electoral competition leads the economy to achieve Pareto e ¢ cient allocations that markets cannot reach. Politicians internalize the presence of external e¤ects when competing for marginal voters who could swing their vote. In Chapter 3, this dissertation investigates the politiciansincentives to pursue
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"... This paper identifies a novel political-economy explanation for the observed variation in the cash and in-kind (basic health care, public housing or food stamps) mixture of social transfers. We put forward the hypothesis that the share of in-kind transfers is positively correlated with corruption in ..."
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This paper identifies a novel political-economy explanation for the observed variation in the cash and in-kind (basic health care, public housing or food stamps) mixture of social transfers. We put forward the hypothesis that the share of in-kind transfers is positively correlated with corruption in democratic countries. The argument is derived in a theoretical model which assumes that it is easier for politicians to appropriate cash transfers than in-kind transfers. Voters in corrupt countries know that cash transfers invite corrupt behavior and therefore they elect parties that opt for in-kind redistributive measures. The empirical analysis for 34 OECD countries over the 1984 – 2007 period provides robust evidence in favor of this hypothesis. Moreover, the positive correlation between the in-kind share of social transfers and perceived corruption is stronger for the “most democratic ” OECD countries and in countries with specific institutional characteristics such as free media that further enhance democratic accountability.
Comparing Cash and Voucher Transfers in a Humanitarian Context: Evidence from the Democratic Republic of Congo
"... Abstract. Despite recent calls in support of cash transfers, there is little rigorous evidence of the relative impacts of cash versus in-kind transfers, especially in humanitarian contexts, where a majority of such programs take place. This paper uses data from a randomized experiment in the Democr ..."
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Abstract. Despite recent calls in support of cash transfers, there is little rigorous evidence of the relative impacts of cash versus in-kind transfers, especially in humanitarian contexts, where a majority of such programs take place. This paper uses data from a randomized experiment in the Democratic Republic of Congo to assess the relative impacts and costs of equivalently-valued cash and voucher transfers. The voucher program distorted households' purchases along both the extensive and intensive margin as compared with unconstrained cash households. Yet there were no differences in food consumption or other measures of well-being, in part due to the fact that voucher households were able to resell part of what they purchased. As there were no significant benefits to vouchers, cash transfers were the more cost effective modality for both the implementing agency and program recipients in this context.
Support for Public Provision of a Private Good with Top-Up and Opt-Out: A Controlled Laboratory Experiment
"... Abstract This paper presents the results of a revealed-choice experiment testing the theoretical predictions of political economy models regarding public support for a publicly provided private good financed with proportional income taxes when individuals can purchase the good privately and either ..."
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Abstract This paper presents the results of a revealed-choice experiment testing the theoretical predictions of political economy models regarding public support for a publicly provided private good financed with proportional income taxes when individuals can purchase the good privately and either continue to consume public provision ('top-up') or forego public provision ('opt-out'), but in each case continue to pay income taxes. Our laboratory results confirm behavior is consistent with the predicted majority-preferred tax rate under mixed financing with top-up, but we identify preferences for significantly higher rates of public provision than predicted under mixed financing with opt-out. Using non-parametric regression analysis, we explore the relationship between individuals' top-up and opt-out decisions and both their income levels and the implemented tax rates.
Payment Types and Participation in Payment for Ecosystem Services Programs: Stated Preferences of Landowners (online) Payment Types and Participation in Payment for Ecosystem Services Programs: Stated Preferences of Landowners
"... Abstract Because the effectiveness of payment for ecosystem services (PES) programs depends on landowners' engagement, understanding the relationship between the type of payment and participation is a key issue. This paper reports on a choice experiment that quantifies landowners' prefere ..."
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Abstract Because the effectiveness of payment for ecosystem services (PES) programs depends on landowners' engagement, understanding the relationship between the type of payment and participation is a key issue. This paper reports on a choice experiment that quantifies landowners' preferences for cash and educational in-kind payment. The main results indicate a positive correlation between participation in a PES contract and the magnitude of the cash payment, while participation seems uncorrelated with the magnitude of the educational inkind payment. In addition, we investigate the mix of payment types and heterogeneity in preferences, which can help policymakers design strategies to increase participation.
Participation of the Poorest and Distributional Effects of Conditional Cash Transfer Programs *
, 2010
"... Conditional Cash Transfers (CCTs) are now a widespread policy tool. They are seen as an answer to short term income poverty through the transfer component, and a support to longer term human capital formation among the poor through conditioning the transfer on educational enrollment (and enrollment ..."
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Conditional Cash Transfers (CCTs) are now a widespread policy tool. They are seen as an answer to short term income poverty through the transfer component, and a support to longer term human capital formation among the poor through conditioning the transfer on educational enrollment (and enrollment in health schemes). However, CCTs condition income transfers on the consumption of normal goods—richer households are more likely to consume more educational and health maintenance opportunities than poorer households. This suggests that the poorest households may benefit least from CCTs, even to the extent that the very poorest may not participate at all. Using household survey data from rural Mexico, this paper establishes that participation rates in the Oportunidades program are indeed significantly lower for the very poorest households, after controlling for a number of variables which might independently affect participation. With this empirical finding as a basis, I develop a model to conduct policy analysis comparing CCTs with Unconditional Cash Transfers (UCTs), deriving precise conditions under which one dominates the other if the objective is poverty reduction. In particular, it is shown that UCTs could be preferred over CCTs when a government has a sufficiently high degree of poverty aversion. It is also shown that these basic arguments carry over from income poverty to “education poverty.”
