A Common Fallacy about In-Kind Subsidies: A Housing Program Application

The relative effects of different types of subsidies on recipients are well known from the theory of public finance. The general conclusion is that a recipient's level of well being will be smaller with an in-kind subsidy than with a cash grant of equal size. This paper, however, undertakes to show that this is not necessarily the result involving the subsidization of a public good within a collectivity. This may occur if a locality is the recipient collectivity of an intergovernmental grant or a family is the recipient of benefits under a welfare program.