On the marginal social cost of cash-cum-in-kind transfers

Abstract

This paper investigates the marginal social cost of cash-cum-in-kind transfers (MSCKT). Based on a generalization of Wildasin (1984), we characterize that the marginal social cost of public funds depends on the relation between labor supply and the cash-cum-in-kind transfers. To estimate the response of labor supply to these publicly provided goods, and simulate the MSCKT for Brazil, we use the Brazilian household data survey in 2004. Our simulations suggest that MSCKT can increases up to 14% if compared to cases in which cash-cum-in-kind transfers have their effects ignored on labor supply response on the part of individuals.