In-Kind Benefits and Behavioral Demand

Abstract

This paper evaluates demand when making unhealthy products, like soda, ineligible for purchase with in-kind benefits. We utilize policy variation to identify how product specific in-kind eligibility affects the marginal propensity to consume. Difference-inDifference estimates suggest a 14 to 21 percent decline in soda purchases if soda was made ineligible for purchase with Supplemental Nutrition Assistance Program (SNAP) benefits. We then estimate a model with mental accounting to rationalize observed patterns. We find that soda purchases would decline by 18 percent if soda were made ineligible. In addition, juice purchases would increase by 7 percent, decreasing sugars purchased from beverages.

JEL Classification: D12, I12, I18, I38, L66