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What Are Food Stamps Worth?

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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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    1. A Negative Income Tax, One Step at a Time
      by Ed Dolan in Ed Dolan's Econ Blog on 2024-02-14 14:52:00

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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. Almada, Lorenzo N. & Tchernis, Rusty, 2018. "Measuring effects of SNAP on obesity at the intensive margin," Economics & Human Biology, Elsevier, vol. 31(C), pages 150-163.
    3. 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, The Centre for Market and Public Organisation, University of Bristol, UK.
    4. 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.
    5. 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.
    6. repec:bri:cmpowp:13/328 is not listed on IDEAS
    7. Charles L. Baum II, 2010. "The Effects of Food Stamps on Obesity," Working Papers 201003, Middle Tennessee State University, Department of Economics and Finance.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. Tagliati, Federico, 2022. "Welfare effects of an in-kind transfer program: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 154(C).
    13. Ethan M.J. Lieber & Lee M. Lockwood, 2013. "Costs and Benefits of In-Kind Transfers: The Case of Medicaid Home Care Benefits," Working Papers wp294, University of Michigan, Michigan Retirement Research Center.
    14. 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.
    15. Emek Basker, 2015. "Change at the Checkout: Tracing the Impact of a Process Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 339-370, June.
    16. Lovett Nicholas, 2018. "Food Stamps, Income Shocks, and Crime: Evidence from California," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(4), pages 1-19, October.
    17. 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.
    18. 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.
    19. Karen Hermans; & Bea Cantillon; & Anikó Bernát; & Elena Carrillo-Álvarez; & Irene Cussó-Parcerisas; & Lauri Mäkinen & Júlia Muñoz Martínez; & Péter Szivos;, 2023. "Food aid in four European countries: Assessing the price and content of charitable food aid packages by using food basket, household budget survey and contextual data," Working Papers 2301, Herman Deleeck Centre for Social Policy, University of Antwerp.
    20. 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.
    21. 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.
    22. Cooper, Kerris & Stewart, Kitty, 2015. "Does money in adulthood affect adult outcomes?," LSE Research Online Documents on Economics 121477, London School of Economics and Political Science, LSE Library.
    23. Saeed, Muhammad Kashif & Hayat, Muhammad Azmat, 2020. "The Impact of Social Cash Transfers on Poverty in Pakistan-A Case Study of Benazir Income Support Programme," MPRA Paper 99805, University Library of Munich, Germany.
    24. 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.

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    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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