7. Market eﬀects INTRODUCTION Social transfers interact with markets in two, fundamental, interdependent ways: 1. 2. They have impacts on local markets, in particular markets for food, farm inputs, and labour. They are themselves aﬀected by market conditions, especially price levels of staple foods like maize and rice, and this inﬂuences the most appropriate design of transfers and their outcomes. Taking each of these in turn, the impacts of social transfers on food, input and labour markets are rarely properly assessed. These impacts depend on the characteristics of supply and demand in each market; on how far food or input transfers add to consumption or substitute for commodities already traded; on the scale of transfers compared with corresponding volumes traded on local markets; on how well markets function or are integrated with markets further aﬁeld; and on how and where transferred commodities, food in particular, are procured. The impacts of markets on social transfers are a more immediate challenge to scheme design. In general a main aim is to address vulnerability arising from changing market conditions, in particular by protecting food entitlements when food prices climb. Beneﬁciaries’ transaction costs (time and transport especially) in accessing local markets are important and inﬂuence the choice between alternative forms of transfer. Ideally, transfers need to build in ﬂexibility to vary their form and level in response to market conditions, though this complicates management and budgeting. Cash transfers are most eﬀective when their level is linked on...
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