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What Are Food Stamps Worth?

Author

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  • Diane Whitmore

    (Princeton University)

Abstract

The carte-blanche principle implies that food stamp recipients would be better off if they were given cash instead of an equivalent amount in food stamps. I estimate the cash-equivalent value of food stamps and the lowest price a recipient would accept to sell her "extra" food stamps on the underground market. I estimate that between 20 and 30 percent of food stamp recipients spend less on food than their food stamp benefit amount if they receive cash instead of stamps, and therefore would be better off with cash. Using a theoretical model I present and data from experiments conducted in two states, I estimate that on average "distorted" food stamp recipients value their total benefits at 80 percent of their face value. Aggregating over recipients, the annual deadweight loss associated with the food stamp program is one-half billion dollars. Food diary data indicate that providing cash instead of stamps causes some distorted recipients to decrease their food spending - especially on soda and juice - but has no negative consequence for nutrition. As predicted by theory, inframarginal food stamp recipients do not alter their behavior if they are given cash instead of food stamps. Although paying in-kind benefits results in some deadweight loss, it is thought that an underground market for the excess stamps will be created to alleviate some of the loss. I present new survey evidence indicating that stamps trade for only about 65 percent of their face value on the underground market.

Suggested Citation

  • Diane Whitmore, 2002. "What Are Food Stamps Worth?," Working Papers 847, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:468
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    References listed on IDEAS

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    5. Thomas M. Fraker & Alberto P. Martini & James C. Ohls & Michael Ponza, 1995. "The effects of cashing-out food stomps on household food use and the cost of issuing benefits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 14(3), pages 372-392.
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    7. Betsey A. Kuhn, 1996. "Policy Watch: The Food Stamp Program and Welfare Reform," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 189-198, Spring.
    8. Thomas M. Fraker & Alberto P. Martini & James C. Ohls & Michael Ponza & Elizabeth A. Quinn, 1992. "The Evaluation of the Alabama Food Stamp Cash-Out Demonstration Vol. 1: Recipient Impacts," Mathematica Policy Research Reports bc4fe28e4d704a8a84e7adf0b, Mathematica Policy Research.
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    Citations

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    Cited by:

    1. Tiehen, Laura & Jolliffe, Dean & Gundersen, Craig, 2012. "How State Policies Influence the Efficacy of the Supplemental Nutrition Assistance Program in Reducing Poverty," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124937, Agricultural and Applied Economics Association.
    2. Rusty Tchernis & Lorenzo N. Almada, 2016. "Measuring Effects of SNAP on Obesity at the Intensive Margin," Working Papers 2016-019, Human Capital and Economic Opportunity Working Group.
    3. Timothy K.M. Beatty & Charlotte J. Tuttle, 2015. "Expenditure Response to Increases in In-Kind Transfers: Evidence from the Supplemental Nutrition Assistance Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 390-404.
    4. Rachel Griffith & Sarah Smith & Stephanie von Hinke Kessler Scholder, 2014. "Getting a healthy start? Nudge versus economic incentives," The Centre for Market and Public Organisation 14/328, Department of Economics, University of Bristol, UK.
    5. Bruce D. Meyer & James X. Sullivan, 2006. "Consumption, Income, and Material Well-Being After Welfare Reform," NBER Working Papers 11976, National Bureau of Economic Research, Inc.
    6. Maoyong Fan & Yanhong Jin, 2015. "The Supplemental Nutrition Assistance Program and Childhood Obesity in the United States: Evidence from the National Longitudinal Survey of Youth 1997," American Journal of Health Economics, MIT Press, vol. 1(4), pages 432-460, Fall.
    7. Maoyong Fan & Zhen Lei & Gordon Liu, 2016. "Discounting of Medical Savings Accounts," American Journal of Health Economics, MIT Press, vol. 2(2), pages 161-183, Spring.
    8. Beatty, Timothy K.M. & Blow, Laura & Crossley, Thomas F. & O'Dea, Cormac, 2014. "Cash by any other name? Evidence on labeling from the UK Winter Fuel Payment," Journal of Public Economics, Elsevier, vol. 118(C), pages 86-96.
    9. repec:bri:cmpowp:13/328 is not listed on IDEAS
    10. Charles L. Baum, 2011. "The Effects of Food Stamps on Obesity," Southern Economic Journal, Southern Economic Association, vol. 77(3), pages 623-651, January.
    11. Leininger Lindsey & Levy Helen & Schanzenbach Diane, 2010. "Consequences of SCHIP Expansions for Household Well-Being," Forum for Health Economics & Policy, De Gruyter, vol. 13(1), pages 1-32, June.
    12. repec:eee:jhecon:v:58:y:2018:i:c:p:176-187 is not listed on IDEAS
    13. Kim, Jiyoon, 2016. "Do SNAP participants expand non-food spending when they receive more SNAP Benefits?—Evidence from the 2009 SNAP benefits increase," Food Policy, Elsevier, vol. 65(C), pages 9-20.
    14. Lusk, Jayson L. & Weaver, Amanda, 2017. "An experiment on cash and in-kind transfers with application to food assistance programs," Food Policy, Elsevier, vol. 68(C), pages 186-192.
    15. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    16. Justine Hastings & Jesse M. Shapiro, 2018. "How Are SNAP Benefits Spent? Evidence from a Retail Panel," American Economic Review, American Economic Association, vol. 108(12), pages 3493-3540, December.
    17. Tuttle, Charlotte, 2016. "The Stimulus Act of 2009 and Its Effect on Food-At-Home Spending by SNAP Participants," Economic Research Report 262193, United States Department of Agriculture, Economic Research Service.
    18. Griffith, Rachel & von Hinke, Stephanie & Smith, Sarah, 2018. "Getting a healthy start: The effectiveness of targeted benefits for improving dietary choices," Journal of Health Economics, Elsevier, vol. 58(C), pages 176-187.

    More about this item

    JEL classification:

    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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