Determinants of choosing in-kind benefits over cash: A study among Nepalese farmers.

Abstract

This study investigates the determinants of choosing in-kind benefits over cash transfers when their respective values are equivalent. Employing a rigorous two-step experiment with a large sample size (n = 962), we offer real monetary rewards to respondents. In the first step, we asked whether the respondents would choose NRs. 1,000 (≈ US dollars 9) in cash or in-kind benefit that is worth NRs. 1,000. We observe that approximately two-thirds of participants opt for in-kind benefits of equal value to the proposed cash transfer. In analyzing the factors influencing this preference, our results indicate that households with higher non-farm incomes are less likely to choose in-kind benefits. Increasing the non-farm income by NRs. 100,000 respondents are 0.2% less likely to choose in-kind benefits. Furthermore, households with limited savings demonstrate a higher preference toward in-kind benefits over cash transfers. Not having NRs. 25,000 savings would make respondents 10% more likely to choose in-kind benefits. Previously receiving in-kind benefits also increase the likelihood of choosing them over cash. Additionally, households with restricted market access are more inclined to opt for in-kind benefits. Notably, in the second step of the experiment which involves only those who chose cash in the first step of the experiment, only 48% of respondents would opt for in-kind benefits even when values were higher by NRs. 150 to 450. This research sheds light on the factors affecting the decision-making process between in-kind benefits and cash transfers and provides insights into the design of effective social welfare policies. More specifically, findings from this study suggest tailored approaches for assisting people could be followed based on their income level and accessibility to the market.