Intertemporal Effects,Intertemporal Suitability,and the Analysis of In-Kind Subsidy Programs

Abstract

In-kind subsidy programs have traditionally been analyzed using a static one-period model of consumer behavior. In this article it is argued that an intertemporal framework is in principle superior, not only as a way of explaining consumer behavior but also as a way of accurately characterizing the subsidies themselves and the restrictions they impose on the consumption behavior of recipients. Potentially important distinctions between different types of subsidy programs that are obscured in a static framework become apparent once the intertemporal aspects of the problem are considered. Examples are given that illustrate the potential benefits of using an intertemporal framework in the evaluation of in-kind programs.

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