Expenditure response to increases in in-kind transfers: Evidence from the Supplemental Nutrition Assistance Program
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Recent studies on food stamp participant households' marginal propensity to spend out of
food stamps versus income have had contradictory results: experimental studies have found
household behavior aligns with standard economic theory where households' marginal propensity
to spend on food out of food stamps is equivalent to cash income; observational studies found
that households have a larger marginal propensity to spend out of food stamps than cash
income. In this study, we re-examine this question by estimating how an unprecedentedly
large increase in food stamp benefits due to the implementation of the American Recovery and
Reinvestment Act affects food-at-home expenditure. We find that the policy change caused
households to increase food-at-home expenditure as well as increase households' share of total
expenditure allocated toward food-at-home expenditure. We compare these results to a time
period without a meaningful food stamp policy change and find our results are unique to the
ARRA implementation time period.