Testing Paternalism: Cash versus In-Kind Transfers

Abstract

Welfare programs are often implemented in-kind to promote out- comes that might not be realized under cash transfers. This paper tests whether such paternalistically motivated transfers are justi ed compared to cash, using a randomized controlled trial of Mexico’s food assistance program. In relation to total food consumption, the in-kind transfer was infra-marginal and nondistorting. However, the transfer contained ten food items, and there was large variation in the extent to which individual foods were extra-marginal and distort- ing. Small differences in the nutritional intake of women and chil- dren under in-kind transfers did not lead to meaningful differential improvements in health outcomes compared to cash.