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The First of the Month Effect: Consumer Behavior and Store Responses

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  • Justine S. Hastings
  • Ebonya L. Washington

Abstract

Previous research has used survey and diary data to carefully document that Food Stamp recipients decrease their expenditures and consumption of food throughout the benefit month, the beginning of which is defined by the date on which benefits are distributed. The reliance on survey and diary data has meant that researchers could not test two rational hypotheses for why food consumption cycles. Using detailed grocery store scanner data we ask 1) whether cycling is due to a desire for variation in foods consumed that leads to substitution across product quality within the month and 2) whether cycling is driven by countercyclical pricing by grocery retailers. We find support for neither of these hypotheses. We find that the decrease in food expenditures is largely driven by reductions in food quantity, not quality, and that prices for foods purchased by benefit households vary pro-cyclically with demand implying that benefit households could save money by delaying their food purchases until later in the month. The price effects are small relative to demand changes and relative to impacts found for other subsidy programs such as EITC, suggesting that most of the benefits accrue to the intended recipients particularly in product categories and stores where benefit recipients represent a small fraction of overall demand. We conclude by concurring with previous literature that food cycling behavior is most likely due to short-run impatience.

Suggested Citation

  • Justine S. Hastings & Ebonya L. Washington, 2008. "The First of the Month Effect: Consumer Behavior and Store Responses," NBER Working Papers 14578, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14578
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    References listed on IDEAS

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    Cited by:

    1. Berg, Nathan & Kim, Jeong-Yoo, 2010. "Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption," MPRA Paper 26593, University Library of Munich, Germany.
    2. Lorenzo Almada & Rusty Tchernis, 2016. "Measuring Effects of Snap on Obesity at the Intensive Margin," Working Papers id:11369, eSocialSciences.
    3. Santiago Garriga & María Ana Lugo & Jorge Puig, 2018. "Effects of Food Prices on Poverty: The Case of Paraguay, a Food Exporter and a Non-Fully Urbanized Country," CEDLAS, Working Papers 0231, CEDLAS, Universidad Nacional de La Plata.
    4. Manisha Shah & Bryce Millett Steinberg, 2015. "Workfare and Human Capital Investment: Evidence from India," NBER Working Papers 21543, National Bureau of Economic Research, Inc.
    5. Lorenzo Almada & Ian McCarthy & Rusty Tchernis, 2016. "What Can We Learn about the Effects of Food Stamps on Obesity in the Presence of Misreporting?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(4), pages 997-1017.
    6. Hinnosaar, Marit, 2016. "Time inconsistency and alcohol sales restrictions," European Economic Review, Elsevier, vol. 87(C), pages 108-131.
    7. Damon, Amy L. & King, Robert P. & Leibtag, Ephraim, 2013. "First of the month effect: Does it apply across food retail channels?," Food Policy, Elsevier, vol. 41(C), pages 18-27.
    8. Fiedler, John L. & Mwangi, Dena M., 2016. "Improving household consumption and expenditure surveys’ food consumption metrics: Developing a strategic approach to the unfinished agenda:," IFPRI discussion papers 1570, International Food Policy Research Institute (IFPRI).
    9. Michael Grubb, 2015. "Behavioral Consumers in Industrial Organization: An Overview," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 247-258, November.
    10. Dave, Dhaval M. & Kelly, Inas Rashad, 2012. "How does the business cycle affect eating habits?," Social Science & Medicine, Elsevier, vol. 74(2), pages 254-262.
    11. repec:eee:labeco:v:51:y:2018:i:c:p:202-226 is not listed on IDEAS
    12. White, Justin S. & Basu, Sanjay, 2016. "Does the benefits schedule of cash assistance programs affect the purchase of temptation goods? Evidence from Peru," Journal of Health Economics, Elsevier, vol. 46(C), pages 70-89.
    13. Baylis, Katherine R. & Fan, Linlin & Gundersen, Craig & Michele, Ver Ploeg & James, Ziliak, 2014. "The Location and Timing of SNAP Purchases," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170200, Agricultural and Applied Economics Association.
    14. Matias Busso & Sebastian Galiani, 2014. "The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment," NBER Working Papers 20054, National Bureau of Economic Research, Inc.
    15. Zaffou, Madiha & Campbell, Benjamin & Rabinowitz, Adam, 2016. "Spillover Effect of Participation in Women, Infant and Children (WIC) Program on Consumer’s Purchasing Behavior of Private Label Goods," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230100, Southern Agricultural Economics Association.
    16. repec:eee:jfpoli:v:72:y:2017:i:c:p:132-145 is not listed on IDEAS
    17. Cawley, John, 2015. "An economy of scales: A selective review of obesity's economic causes, consequences, and solutions," Journal of Health Economics, Elsevier, vol. 43(C), pages 244-268.
    18. Ashok Kaul & Gregor Pfeifer & Stefan Witte, 2016. "The incidence of Cash for Clunkers: Evidence from the 2009 car scrappage scheme in Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 1093-1125, December.
    19. Leschewski, Andrea M. & Weatherspoon, Dave D., 2017. "SNAP Household Food Expenditures Using Non-SNAP Payment Methods," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259139, Agricultural and Applied Economics Association.
    20. Carman, Katherine Grace & Zamarro, Gema, 2016. "Does Financial Literacy Contribute To Food Security?," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 0(Number 1), pages 1-19, January.
    21. Inés Berniell, 2018. "Pay Cycles: Individual and Aggregate Effects of Paycheck Frequency," CEDLAS, Working Papers 0221, CEDLAS, Universidad Nacional de La Plata.

    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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