Expenditure Response to Increases in In‐Kind Transfers: Evidence from the Supplemental Nutrition Assistance Program

Abstract

Economic theory predicts that households who receive less in Supplemental Nutrition Assistance Program benefits than they spend on food will treat SNAP benefits as if they were cash. However, empirical tests of these predictions draw different conclusions. In this study, we reexamine this question using recent increases in Supplemental Nutrition Assistance Program benefits, the largest of which was due to the American Recovery and Reinvestment Act of 2009. We find that increases in benefits cause households to increase their food budget share by more than would be predicted by theory. Results are robust to a host of specification tests.

Keywords: Labeling effect, Stimulus Bill, Supplemental Nutrition Assistance Program