Earmarked Vouchers and Unconditional Cash Transfers
The government, through the welfare programs plays an important role in the society in
times of economic crisis. The intended purpose of the welfare is to assist people manage
their insecurities of life and financial stress. One of the ways government spread the
benefits in through provision of the government transfers which target the low-income
earners in the society. Government reach the intended group in two different method
namely unconditional cash transfer and in-kind transfer. Unconditional cash transfer
reach to people inform of cash meaning one is not limited on how to spend the funds. In
kind transfer such as earmarked voucher, is a benefit that is tied to a particular good or
service meaning the benefits are attached on the consumption of that particular product
and service. Many people would prefer unconditional cash transfer as opposed to
vouchers because they would want to spend based their own preferences consumption
expenditure. This paper aims to evaluate the implication of replacing earmarked vouchers
with unconditional cash transfers to improve the welfare of low-income earners more
using consumer choice theory.
The analysis of consumer choice model however does not consider labelling effect of
Government transfers.1 Different researchers in their findings have indicated the effects
of labeling. Research by Beatty on Winter fuel indicated a higher consumption of 43% of
labeled household fuel compare to 3% of unlabeled house hold fuel. Griffith found a weak
1
Beatty, Timothy,Thomas & Cormac (2011).
, 2
effect of labeling in the research on how consumers spent on heathy food indicating rigid
dietary preferences among the consumers.2
Earmarked voucher is type of conditional money transfer where the set aside fund is
restricted and tied to a certain purpose. An example is supplemental nutrition assistance
program (SNAP) vouchers in the USA which allows consumers to spend on certain food
products. Earmarked vouchers are accessible through the use of an e-card or plastic card
that has credit loaded in it. 3On the other hand, is Unconditional cash Transfers. This refer
to benefits that are received inform of cash and are not limited to a certain expenditure.
Beatty adds that consumers complement this benefit to their income to improve on their
expenditure. The impact of these two benefits is observed on budget constraints and
consumer preference as shown below.
2
Griffith, Hinke & Smith (2015).
3
Besanko & Braeutigam (2014).
The government, through the welfare programs plays an important role in the society in
times of economic crisis. The intended purpose of the welfare is to assist people manage
their insecurities of life and financial stress. One of the ways government spread the
benefits in through provision of the government transfers which target the low-income
earners in the society. Government reach the intended group in two different method
namely unconditional cash transfer and in-kind transfer. Unconditional cash transfer
reach to people inform of cash meaning one is not limited on how to spend the funds. In
kind transfer such as earmarked voucher, is a benefit that is tied to a particular good or
service meaning the benefits are attached on the consumption of that particular product
and service. Many people would prefer unconditional cash transfer as opposed to
vouchers because they would want to spend based their own preferences consumption
expenditure. This paper aims to evaluate the implication of replacing earmarked vouchers
with unconditional cash transfers to improve the welfare of low-income earners more
using consumer choice theory.
The analysis of consumer choice model however does not consider labelling effect of
Government transfers.1 Different researchers in their findings have indicated the effects
of labeling. Research by Beatty on Winter fuel indicated a higher consumption of 43% of
labeled household fuel compare to 3% of unlabeled house hold fuel. Griffith found a weak
1
Beatty, Timothy,Thomas & Cormac (2011).
, 2
effect of labeling in the research on how consumers spent on heathy food indicating rigid
dietary preferences among the consumers.2
Earmarked voucher is type of conditional money transfer where the set aside fund is
restricted and tied to a certain purpose. An example is supplemental nutrition assistance
program (SNAP) vouchers in the USA which allows consumers to spend on certain food
products. Earmarked vouchers are accessible through the use of an e-card or plastic card
that has credit loaded in it. 3On the other hand, is Unconditional cash Transfers. This refer
to benefits that are received inform of cash and are not limited to a certain expenditure.
Beatty adds that consumers complement this benefit to their income to improve on their
expenditure. The impact of these two benefits is observed on budget constraints and
consumer preference as shown below.
2
Griffith, Hinke & Smith (2015).
3
Besanko & Braeutigam (2014).
