ABSTRACT
Economists have long argued that in-kind transfer programs are an inefficient way to increase the well-being of welfare recipients. We have seen for example, that families increase food purchases less than a quarter in response to a dollar increase in food stamp benefits, and that they spend at most half of a dollar’s worth of housing vouchers on rents. Since families on welfare clearly prefer to buy a different basket of goods than the one that government wishes to provide, wouldn’t their well-being be maximized by giving them the money and allowing them to choose for themselves? Forcing people to consume goods they don’t want wastes scarce resources. And the fact that new bureaucracies must be created to administer each type of in-kind benefits creates additional inefficiencies.
