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How Are SNAP Benefits Spent? Evidence from a Retail Panel

Listed author(s):
  • Justine S. Hastings
  • Jesse M. Shapiro

We use a novel retail panel with more than six years of detailed transaction records to study the effect of participation in the Supplemental Nutrition Assistance Program (SNAP) on household spending. We frame our approach using novel administrative data from the state of Rhode Island. The marginal propensity to consume SNAP-eligible food (MPCF) out of SNAP benefits is 0.5 to 0.6. The MPCF out of cash is much smaller. These patterns obtain even for households for whom SNAP benefits are economically equivalent to cash in the sense that benefits do not cover all food spending. We reject the hypothesis that households respect the fungibility of money in a semiparametric setup. A post-hoc model of mental accounting rationalizes these facts and others.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23112.

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Date of creation: Jan 2017
Handle: RePEc:nbr:nberwo:23112
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