There?s no such thing as a free lunch: Evidence of altruism and agency from household expenditure responses to child nutrition programs

Abstract

Many countries provide transfers for particular client groups such as children and often such transfers are in-kind rather than cash. However, this may, at least partially, crowd out private expenditures on the goods in question because they reduce the incentive for other individuals, like parents, to make altruistic transfers. They are often made to one household member on behalf of another so there may also be agency concerns: the recipient may divert some of the transfer away from the intended beneficiary. This paper throws light on these issues using three nutrition programs for children in UK households: free lunch at school for children from poor households; free milk to poor households with pre-school children; and free milk at day-care for pre-school children in attendance regardless of parental income. We provide difference in difference estimates based on a welfare reform and on variation in the timing of school holidays. These estimates are broadly consistent with estimates of a structural model that is identified using the same welfare reform. This gives us confidence in the interpretation of our estimates that the structural model provides but the simple difference-in-difference cannot.