Transfers in kind: learning the old lessons, again
President Rowhani has received well-deserved high marks in foreign policy for his management of the tough negotiations with P5+1 in Geneva, but his first attempt at dealing with Iran’s broken social protection system does not deserve a passing grade. I explain this in my latest post at Iran Matters. The food distribution plan that, according to an editorial in the conservative Keyhan newspaper, “could have been a gesture that the government cares about the poor … but instead it turned into insult and humiliation.”
The government seems to have made a hasty decision that transfers in kind are superior to cash, despite evidence to the contrary, as I argued in a recent post here. Tadbir, which is the motto of Rouhani’s government and translates into prudence and experience in Persian, should include economics research and the experience of other countries. Are there channels for this type of information to find its way into Iran’s policy circles?
Tyranny of numbers 
True, cash in hand is worth more than half of that value of food and goods. However, what is the margin of error here in terms of how far that cash would go? Would people actually spend 60$ on food? Or would a good percentage spend it on drugs and other things in a black market economy that wouldn’t help the economy or the people? Does that then bring the value of the cash closer to the “half value” of the food in kind?
Also, as a side note: Will the Iranian people and economy reap some benefit from the relaxing of U.S. sanctions, and freeing up of over 8 Billion USD to the Iranian govt as part of the Nuclear deal?
Thank you for your good questions. The average share of good expenditures by households is about one-third of the total expenditures as high as about 45% for the poorest decile and as low as 20% for the highest decile. I have not noticed any change in the behavior of the households with respect to food expenditures, but have not finished looking at the data yet. We have to dig more deeply into the data to see how they spent the $45 of cash transfer.
On your second, question, the answer is yes, the cash released will help the government close its deficit, which should benefit the average person.
From: Tyranny of numbers <comment-reply@wordpress.com> Reply-To: “comment+2i1eh_sdabw-_u1dqrmpgjrpj@comment.wordpress.com” <comment+2i1eh_sdabw-_u1dqrmpgjrpj@comment.wordpress.com> Date: Tuesday, February 18, 2014 at 1:45 PM To: Djavad <salehi@vt.edu> Subject: [Tyranny of numbers] Comment: “Transfers in kind: learning the old lessons, again”