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How do government transfer payments affect retail prices and welfare? Evidence from SNAP

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  • Leung, Justin H.
  • Seo, Hee Kwon

Abstract

We study the effect of the Supplemental Nutrition Assistance Program (SNAP) on retail prices nationwide. State-level program adjustments motivate our identification strategy. A 1% increase in benefits per population raises grocery prices by a persistent 0.08%. A calibrated partial-equilibrium model implies a marginal benefit dollar raises a recipient’s consumer surplus from groceries by $0.7, producer surplus by $0.5, and lowers each non-SNAP consumer’s surplus by $0.05, because of a large marginal-propensity-to-consume-food out of SNAP, low elasticities of demand, and moderate market power. To guarantee the real intended spending power on food, benefits should be increased by 7%.

Suggested Citation

  • Leung, Justin H. & Seo, Hee Kwon, 2023. "How do government transfer payments affect retail prices and welfare? Evidence from SNAP," Journal of Public Economics, Elsevier, vol. 217(C).
    • Handle: RePEc:eee:pubeco:v:217:y:2023:i:c:s0047272722001621
    DOI: 10.1016/j.jpubeco.2022.104760
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    Cited by:

    1. Herrera Caicedo, Alejandro & Majumdar, Inder, 2026. "Entry dynamics and demand-side subsidies: Evaluating the impact of SNAP ABAWD waivers on retailer entry," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404565, Agricultural and Applied Economics Association.
    2. Dong, Xiao & Byrne, Anne T. & Rhone, Alana & Ver Ploeg, Michele, 2025. "Review: untangling the complex economics of the local food retail environment," Food Policy, Elsevier, vol. 137(C).
    3. Shantanu Dutta & Divya Singhvi & Somya Singhvi, 2025. "Buying Cheap: Brand Switching During Economic Distress and Its Disparate Impact on Consumers," Manufacturing & Service Operations Management, INFORMS, vol. 27(2), pages 441-459, March.
    4. Nicholas Li & Angela Daley & Barry Watson, 2025. "Give and take? Child benefits and prices in Northern Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(3), pages 831-859, August.
    5. Nicholas Li & Angela Daley & Barry Watson, 2024. "Give & Take? Child Benefits & Prices in Northern Canada," Working Papers 093, Toronto Metropolitan University, Department of Economics.
    6. repec:ags:aaea22:343887 is not listed on IDEAS
    7. Beatty, Timothy & Ambrozek, Charlotte & Pagan, Gina, 2024. "The Role of Food Assistance in Rural Areas," 2024 Annual Meeting, July 28-30, New Orleans, LA 343887, Agricultural and Applied Economics Association.

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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