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The Impacts of Cash and In-Kind Transfers on Consumption and Labor Supply: Experimental Evidence from Rural Mexico

Sponsor: Thematic Group on Poverty Impact Analysis, Monitoring and Evaluation 
Presenter: Emmanuel Skoufias, Lead Economist (PRMPR)
Chair: Ambar Narayan, Senior Economist (PRMPR)
When: July 23, 2008; 12:30 - 2:00pm

The presenter will discuss the results of a study that uses the unique experimental design of the Food Support Program (Programa Apoyo Alimentario or PAL) in the poor rural areas of southern states of Mexico to compare the impacts of in-kind and cash transfers of equivalent value (mean share of 11.5% of pre-program consumption) on household welfare as measured by food and total consumption, adult labor supply, and poverty. The authors find that approximately two years later the transfer has a large and positive impact on total and food consumption. They also confirm that there are no differences in the effect size of transfers in cash versus transfers in-kind on consumption. The transfer, irrespective of type, does not affect overall participation in labor market activities but induces beneficiary households to switch their labor allocation from agricultural to nonagricultural activities. Lastly, the program is found to lead to a significant reduction in poverty. Overall these findings suggest that the PAL intervention is able to mitigate the impact of imperfections in risk and insurance thus increasing both equity and efficiency.


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