Is the Cure Worse Than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program
American Economic Review · 2020 · Volume 110 · Issue 6
Abstract
Quantity vouchers are used in redistributive programs to shield participants from price variation and alter their consumption patterns. However, because participants are insensitive to prices, vendors of program goods are incentivized to price discriminate between program and non-program customers. I study these trade-offs in the context of a reform to reduce price discrimination in the Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides a quantity voucher for nutritious foods to low-income mothers and children. The reform caused vendors to drop out, reducing program take-up. In addition, smaller vendors increased prices charged to non-WIC shoppers by 6.4 percent.
Keywords
State and Local Government: Health, Education, Welfare, Public Pensions, Health: Government Policy, Regulation, Public Health, Measurement and Analysis of Poverty, Well-Being, and Poverty: Government Programs, Provision and Effects of Welfare Programs, Fertility, Family Planning, Child Care, Children, Youth, Economics of Gender, Non-labor Discrimination
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