Cash and In-Kind Transfers

Government transfers to low-income families have a dual objective. First, they supplement the ability of individuals to maintain a minimum level of subsistence in areas such as nutrition, housing, health, education, and income security. Second, transfers such as unemployment compensation and welfare assistance are countercyclical. This means that their amount increases during times of bad economic performance and decreases when the economy is growing normally. Hence, transfers are larger during recessions. This helps to mitigate extreme cutbacks in household spending and to stabilize the economy. There are two categories of transfers: cash transfers and in-kind transfers. Both kinds of transfers are effective social protection programs targeting poverty and vulnerability. Cash transfers are monetary in nature and allow the recipient unconstrained use of the proceeds. In ...