The Welfare Effects of Changing the Payment Method of Food Assistance Program from Discount and In-kind Transfer to e-voucher: A Graphical Analysis

Abstract

This study proposes a theoretical method for evaluating the effects of food assistance programs in terms of consumer welfare. In particular, we develope a mechanism to derive the equivalent variation to measure the welfare effects of changing the payment method of food assistance programs from discount and in-kind transfer to e-voucher. Further, in order to intuitively present the aforementioned theoretical discussion, this study attempts to visualize the changes in utility and budget constraint based on the economic theory on consumer choice. The results of the graphical analysis show that beneficiaries can achieve a higher level of utility when the benefits are paid through e-voucher system rather than through in-kind transfer. However, it is found that the sign of the welfare effect is varied across the characteristics of consumers when changing the payment method from discount to e-voucher.