Cash transfers, tariffs and quotas

Cash transfers are payments made by the government to people in form of cash. They are benefits paid to people by the government i.e. worker’s compensation benefits in case of injury on the job. This benefits are paid in cash. In-kind benefits  on the other hand are benefits paid to individuals by the government, but unlike cash transfers, they are not paid directly in cash but instead, the individuals receives goods and services for free or at a reduced rate. For instance, in case of an employee who gets injured during the job will get a cover for medical costs and not in cash.

Cash transfers are preferred unlike in kind transfer because with in kind transfers, they have failed to deliver due to active involvement of the government. This paves way for leakages and supply of substandard quality services and political bias in distribution.

Advantages and disadvantages.

            Cash transfers are beneficial because the direct cash transfers can be used in different ways as chooses the beneficiary. One could choose to invest his benefits, thus cash transfers give greater freedom to use to use the benefits in a way that suits the situation. However the cash transfer programs can have their disadvantages, for instance cash transfers made are often used for the wrong purposes hence not meeting the government’s plans and targets. I.e. aid given to the HIV victims.

            The good thing about the in kind transfers is that the government is sure the benefit can used for the intended purpose. For instance if the government is giving welfare type programs, then the in-kind transfers will be used for that purpose. However, in kind transfers have a negative characteristics, the government incurs extra costs that go along with these transfers

Tariffs and quotas

            Tariffs are taxes that are imposed on the imported goods, this makes the prices of these goods to increase on the domestic country. Tariffs are beneficial to the government as it increases it tax revenue. Also, the domestic producers benefit because they receive higher prices. On the other hand, quotas are limits to the amount of goods that is to be imported into the country. Quotas are disadvantageous to the consumers while the local producers benefit by getting higher prices.

            For a small country, the use of tariffs would be of more advantage to the economy than using quotas. This is because, use of quotas, will result in restrictions from the partner countries, it will also lead to widespread corruption from the administration, who will favor countries who bribe them. Unlike when tariffs are used, tariffs do not affect the world prices nor the economy, and the import price rises to full amount.

            While using tariffs, there are parties who gain while others loose. Tariffs increases the price of the goods that are imported, this makes the domestic goods cheaper increasing their demand in the process. Thus the local producers gain from the use of tariffs. Also the government imposes taxes on this goods, this leads to an increase in the tax revenue for the authority. Consumers are the major losers from the use of tariffs, that is, since the goods are taxed, they must increase in price, but often the goods that are imported are those not produced locally. This forces them to buy these goods at costly prices.