Analysis of Food Stamp Program Participation and Food Expenditures

Abstract

A two equation model is developed to examine jointly the determinants of household food stamp program participation and program effects on food expenditures. The model is unique in that it postulates that the participation decision is based on a cost-benefit ratio, selected socioeconomic characteristics, and the potential for increasing both food and nonfood expenditures. Data from the 1977-78 USDA Nationwide Food Consumption Survey Supplemental Low Income Sample is used to estimate the model. Findings suggest that households, in making the participation decision, place equal value on the potential for increasing their food and nonfood expenditures. However, at the margin, bonus stamp income is found to have more than twice the impact of money income on food expenditures. The model's potential for policy analysis is also examined. A fundamental objective of the Food Stamp Program (FSP) is to increase the diet quality of low income households via increasing their food expenditures to that of a reference standard. To achieve this goal, eligible households choosing to participate in the program are provided with an income subsidy in the form of food stamps which can only be spent on food for home consumption.l The effectiveness of the program in achieving this goal can, in. part, be evaluated by analyzing participation rates of the target population and the subsequent effect of this in-kind transfer on food expenditures. David M. Smallwood and James R. Blaylock are agricultural economists with the United States Department of Agriculture, Economic Research Service, National Economics Division. The views expressed in this paper are not necessarily those of ERS or USDA.