Optimal Welfare Policy Under Heterogenous Preferences: A Choice-Based Approach

As technological innovation has lowered the cost of transferring money, many policymakers have begun to discuss replacing in-kind social protection systems with cash transfers. The debate has been particularly intense in the case of India's Public Distribution System, which provides food to poor households and struggles with corruption and inefficiency. Working with the government of Maharashtra, we will conduct an experiment in which PDS beneficiaries have the choice of receiving cash transfers in lieu of their in-kind benefits, where the cash transfer amount will be varied experimentally. Using the take-up rates at different transfer amounts, we will quantify the value that beneficiaries derive from the PDS, as well as the welfare consequences of transitioning to cash transfers or a "choice-based" system.