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  5. In-Kind Transfers as Insurance

In-Kind Transfers as Insurance

  • Lucie Gadenne
  • Samuel Norris
  • Monica Singhal
  • Sandip Sukhtankar
American Economic Review (Forthcoming)

Abstract

Households in developing countries often face variation in the prices of consumption goods. We develop a model demonstrating that in-kind transfers will provide insurance benefits against price risk 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 this condition holds for low-income Indian households. Expansions in India's flagship in-kind food transfer program not only increase caloric intake but also reduce caloric sensitivity to prices. Our results contribute to ongoing debates about the optimal form of social protection programs.

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