Is the Cure Worse than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program

50 Pages Posted: 3 Feb 2020 Last revised: 11 Jul 2021

See all articles by Katherine Meckel

Katherine Meckel

Texas A&M University - Department of Economics

Date Written: January 2020

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%.

Suggested Citation

Meckel, Katherine, Is the Cure Worse than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program (January 2020). NBER Working Paper No. w26725, Available at SSRN: https://ssrn.com/abstract=3530696

Katherine Meckel (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

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