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Welfare Transfers and Intra-Household Trickle Down: A Model with Evidence from the US Food Stamp Program

Author

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  • Robert Breunig
  • Indraneel Dasgupta

Abstract

We examine the case for maintaining welfare and income redistribution programs even when their adverse general equilibrium effects reduce total earnings of poor households. Using a Cournot model of intra-household decision-making, we show that even if welfare cutbacks generate large increases in household income, these may still reduce the well-being of children and elderly dependants. Our model also explains the higher marginal propensity to consume food out of food stamps in the US, compared to that out of market income, noted in earlier empirical studies. We find evidence consistent with our argument in data from a US Food Stamp experiment.

Suggested Citation

  • Robert Breunig & Indraneel Dasgupta, 2003. "Welfare Transfers and Intra-Household Trickle Down: A Model with Evidence from the US Food Stamp Program," CEPR Discussion Papers 469, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:469
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    File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP469.pdf
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    References listed on IDEAS

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    4. J. William Levedahl, 1995. "A Theoretical and Empirical Evaluation of the Functional Forms Used to Estimate the Food Expenditure Equation of Food Stamp Recipients," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(4), pages 960-968.
    5. Shelly J. Lundberg & Robert A. Pollak & Terence J. Wales, 1997. "Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 463-480.
    6. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    7. Wilde, Parke E. & Ranney, Christine K., 1996. "The Distinct Impact Of Food Stamps On Food Spending," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
    8. Robert V. Breunig & Indraneel Dasgupta, 2002. "A Theoretical and Empirical Evaluation of the Functiona Forms Used to Estimate the Food Expenditure Equation of Food Stamp Recipients: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1156-1160.
    9. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
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    13. Dasgupta, Indraneel, 2001. "Gender-biased redistribution and intra-household distribution," European Economic Review, Elsevier, vol. 45(9), pages 1711-1722, October.
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    Cited by:

    1. Kiratu, Nixon Murathi & Mshenga, Patience M. & Ngigi, Margaret, 2016. "Determinants of smallholder farmers’ perception towards smart subsidies; a case of Nakuru Noth district, Kenya," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249316, African Association of Agricultural Economists (AAAE).
    2. Murathi Kiratu, Nixon, 2014. "An Assessment of the Impact of Kilimo Plus Subsidy Program on Smallholder Farmers' Food Security and Income in Nakuru North District, Kenya," Research Theses 243470, Collaborative Masters Program in Agricultural and Applied Economics.

    More about this item

    Keywords

    Food Stamp Program; Welfare Transfers; Cash-out Puzzle; Cournot Model; Intra-household Distribution; Engel Curves;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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