Author Question: What are the main differences between cash transfer payments and payments in-kind? Excluding ... (Read 104 times)

karateprodigy · **on:** Jul 1, 2018

What are the main differences between cash transfer payments and payments in-kind? Excluding paternalistic justifications, is one generally preferable to the other? Why or why not?

What will be an ideal response?

Question 2

Other things remaining the same, an increase in the price of butter can be expected to

A) increase margarine sales.
B) decrease margarine sales.
C) increase butter sales.
D) None of the above

yasmina · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

In-kind transfer payments come in the form of goods and services, while cash transfer payments are in the form of money. In terms of utility of the recipient, cash transfer payments will always be at least as in-kind payments. In most cases, cash transfer payments will be preferred for two main reasons. Most importantly, individuals know their utility functions best and thus will be able to put the income to the use they value the highest. Of secondary concern is that the administrative costs of cash transfers are usually lower than the administrative costs of in-kind payments. Adding everything up, cash transfers are preferable to in-kind payments.

Answer to Question 2

A