Consumption Reponses to In-Kind Transfers: Evidence from the Introduction of the Food Stamp Program

Year: 2006

Research Center: The Harris School of Public Policy Studies, University of Chicago

Investigator: Schanzenbach, Diane W., and Hilary W. Hoynes

Institution: University of Chicago

Project Contact:
Diane Whitmore Schanzenbach
Harris School
University of Chicago
1155 E. 60th Street
Chicago, IL 60637


The Food Stamp Program (FSP), serving 24 million people in 2004 at a cost of $27 billion, is one of the most important income support programs in the United States. Despite this prominence, it has been relatively understudied because researchers find isolating the impact of the FSP on food spending, nutritional intake, labor supply, and other outcomes difficult. Because the program is national, no variation exists in program parameters (such as stark differences in State benefit levels or eligibility) that is typically exploited by researchers to measure program impacts.

This study leverages previously underused variation across counties in the date they originally implemented their FSP in the 1960s and early 1970s. The study employs difference-in-difference methods identified by comparing counties within the same State that introduced the program at different times. Impacts of program availability are estimated on food spending, labor supply, and family income by using data from the Panel Study of Income Dynamics (PSID) from 1968 to1978.

The introduction of the FSP leads to a sizable increase in total food consumption and (consistent with economic theory) to small decreases in both out-of-pocket food spending and the propensity to eat meals in restaurants. The results are quite precisely estimated for total food spending, with less precision in estimating the impacts on the individual components of food spending. In addition, income support programs like the FSP include incentives that might cause recipients to reduce their work effort. This finds no evidence in the PSID of work disincentive impacts—measured as whether the household head is employed or by earnings—associated with the introduction of the FSP. These findings are further confirmed in an analysis of work behavior in the 1970 and 1980 Census.