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Poverty

Poor people can gain from allowing benefits-in-kind to be tradeable, but that is not all that is needed to realize those gains

Governments typically prohibit the resale of the benefits-in-kind often provided by antipoverty programs. Yet the personal gains from those benefits are likely to vary and to be known privately, so there can be gains to poor people from trading their assignments. We know very little about those gains.

To help address this knowledge gap, my new Working Paper, “On the Gains from Tradeable Benefits-in-Kind,” models a competitive market for assignments, and simulates the market using an unusual survey of workers on a rural public-works scheme in Bihar, a poor state of India.

The results indicate large gains from tradeable assignments after first randomizing. A competitive market for tradeable assignments would generate aggregate gains that are around 2 to 3 times the current mean gains to these (mostly very poor) families. It would also have greater impact (by a similar magnitude in terms of mean gains) than an allocation without re-sale options targeted to workers from consumption-poor families. Allowing the assignments to be tradeable in this setting can also make workfare more effective against poverty than (budget-neutral) cash transfers. The simulated allocations with tradeable assignments imply a tendency for somewhat larger gains among poorer households, not the opposite. Gains are similar between male and female workers.

However, the paper also argues that, given the realities of the setting, fully realizing the gains from trade in practice may require complementary policies to help people access the market and to support its administration and regulation. 

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