The Form of Transfers: Cash, Vouchers, or In-Kind

IntroductionWhen designing social safety net programs, a key question is what form transfers to beneficiaries should take.The longstanding "textbook" view in economics has been that cash should be the preferred form of transfer.Although unconditional cash transfers have garnered much recent academic and policy interest, in-kind and voucher programs remain the predominant form of social protection throughout much of the world, particularly for goods and services such as food, fuel, health, and education.In addition, stated beneficiary preferences from a variety of countries contradict the view that cash is necessarily the preferred form of transfer.For example, in a survey of 1,200 rural Indian house holds across nine states, Khera (2014) finds that two-thirds of house holds express a preference for food over cash transfers.1 In this chapter, we examine differences across cash, voucher, and in-kind transfer programs from the beneficiary and planner perspectives.We both explore trade-offs across these transfers and discuss considerations that could improve the effectiveness of a given type of transfer.We highlight illustrative empirical evidence throughout but do not attempt to provide an exhaustive review of the lit er a ture.It is impor tant to note that the bound aries delineating these forms of transfers are not always clear, and even the terms themselves are used in dif fer ent ways in the lit er a ture.In addition, a given form of transfer may be implemented in myriad ways in practice.A highly restrictive voucher, for example, will have many of the characteristics of an in-kind transfer, whereas a less restrictive voucher will begin to approximate a cash transfer.For the purposes of this chapter, we define these transfer modalities as follows, highlighting critical differentiating characteristics: Cash transfers Cash transfers do not restrict the goods and services on which the transfer can be spent.We assume that cash transfers are not indexed to local conditions and focus on unconditional cash transfers (rather than conditional transfers which require beneficiaries to 9The Form of Transfers: Cash, Vouchers, or In-Kind Lucie Gadenne and Monica Singhal