This work is distributed as a Discussion Paper by the

Welfare programs are often implemented in-kind to promote outcomes that might not be realized under cash transfers. I use a randomized controlled trial of the Mexican government’s Food Assistance Program (‘PAL’) to test whether this form of paternalism is necessary, comparing precisely measured consumption and health outcomes under both inkind food and cash transfers. Importantly, I …nd that households do not indulge in the consumption of vices when handed cash. Furthermore, there is little evidence that the in-kind food transfer induced more food to be consumed than did an equal-valued cash transfer. This result is partly explained by the fact that the in-kind transfer was inframarginal in terms of total food. However, the PAL in-kind basket contained 10 individual items, and these transfers indeed altered the types of food consumed for some households. While this distorting e¤ect of in-kind transfers must be a motivation for paternalism, I …nd that households receiving cash consumed equally nutritious foods. Finally, there were few di¤erences in child nutritional intakes, and no di¤erences in child height, weight, sickness, or anemia prevalence. While other justi…cations for in-kind transfers may certainly apply, there is minimal evidence supporting the paternalistic one in this context. Keywords: In-kind transfers, Paternalism, Food expenditure, PAL JEL classi…cation: H42, D62, D12, O12, I38 Address: 579 Serra Mall, Stanford, CA 94305, (650) 492-0381. I am grateful to Giacomo De Giorgi, Luigi Pistaferri, and Seema Jayachandran for advice and suggestions, and Ned Augenblick, Ryan Lampe, and Carla Roa for helpful comments. This research was funded by the Leonard W. Ely and Shirley R. Ely Graduate Student Fund Fellowship through the Stanford Institute for Economic Policy Research.