Unintended consequences of food aid

Chris Blattman

Give cash or food?

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.

A new paper. Not surprising, but never quite proven. Or quantified.

 

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