Cash vs in-kind transfers
The poverty rate would be substantially lower if the market
value of in-kind transfers were added family income. The largest in-kind
transfer is Medicaid, the government health program for the poor. Let’s say the
program costs $7,000 per recipient family.
a. If the government gave each recipient family a $7,000
check instead of enrolling them in the Medicaid program, do you think that most
of these families would spend that money to purchase health insurance? Why?
(Recall that the poverty level for a family of four is about $20,000.)
b. How does your answer to part (a) affect you view about
whether we should determine the poverty rate by valuing in-kind transfers at
the price the government pays for them? Explain.
c. How does your answer to part (a) affect your view about
whether we should provide assistance to the poor in the form of cash transfers
or in-kind transfers? Explain.
