Abstract: I examine the effect of in-kind staple transfers on agricultural production in
a setting where transactions with markets are costly for households and result in
interlinked consumption and production decisions. I leverage the expansion of
India’s Public Distribution system between 1993-2009 as a natural experiment
generating variation in the quantity and value of staple grains transferred to
households and districts. I find that larger PDS quantities are associated with
modest decreases in staple production and farming and modest increases in market/
comparative advantage oriented specialization. The effects are larger for households
and districts with higher market transaction costs or less market-oriented
agriculture.
Keywords: agriculture; production; India; food; Public Distribution System; in-kind transfers
JEL Classification: O20; Q18