Expenditure response to increases in in-kind transfers: Evidence from the Supplemental Nutrition Assistance Program

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.