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For real? Income and non-income effects of cash transfers on the demand for food

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  • Dietrich, Stephan

    (UNU-MERIT, Maastricht University)

  • Schmerzeck, Georg

    (UNU-MERIT, Maastricht University)

Abstract

Cash transfers have become a key policy tool to protect vulnerable populations from malnutrition. Ample evidence shows these programs to have positive impacts on nominal food consumption expenditure. However, with rising food prices, nominal impacts might systematically differ from real impacts. We analyze the effects of Kenyas Hunger Safety Net Program on food demand during a drastic price shock. We find that the impact on nominal food expenditures overstates the impact measured at constant prices. Two factors explain this result: Firstly, households spend most of the transfer on food irrespective of prices, thus increasing losses due to the price shock in absolute terms. Secondly, shifting expenditure towards food categories more strongly affected by the price shock leads to disproportional real losses among treated households. Structural changes in demand associated with transfer modalities account for up to half of the loss in real food expenditures compared to control households.

Suggested Citation

  • Dietrich, Stephan & Schmerzeck, Georg, 2020. "For real? Income and non-income effects of cash transfers on the demand for food," MERIT Working Papers 2020-006, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2020006
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    File URL: https://unu-merit.nl/publications/wppdf/2020/wp2020-006.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ongudi, Silas & Thiam, Djiby, 2021. "The Direct and Indirect Effects of Income on the Consumption of Nutrients: Experimental Evidence from Kenya," 2021 Conference, August 17-31, 2021, Virtual 314956, International Association of Agricultural Economists.

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    More about this item

    Keywords

    Cash transfers; Food prices; Demand; Social protection; Kenya;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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