Relief programs: When it may be better to give food instead of cash

Abstract

A standard way to give relief to the needy is to organize employment or public works programs. It is often argued that in many situations paying workers in cash, instead of food, may be the superior option. The aim of this paper is to caution that some plausible spillover effects may weaken this argument. Observe that paying wages in food and in cash can have differential effects on prices. A cash-for-work program would typically enhance the demand for food, cause food prices to rise and result in more food in the hands of those who have received the wages. This will mean that those who are left out of the program (for example, the old and the infirm) could be worse off.

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