Electronic Benefit Transfer and Food Expenditure Cycles

Abstract

AbstractPrevious research shows that the way transfer income is disbursed can affect what households purchase with that income. In this paper, I provide evidence that disbursement technique can affect the timing of purchases as well. I examine the U.S. Supplemental Nutrition Assistance Program (SNAP), which switched on a state‐by‐state basis from cash‐similar food coupons to Electronic Benefit Transfer (EBT)—a secure debit card—from 1993 to 2004. I find that EBT mitigated boom and bust cycles in food spending associated with SNAP disbursement. This effect is entirely driven by households with children (about two thirds of the SNAP population), who experienced more severe cycles prior to EBT. The effect operates only through the intensive margin—the amount spent on food during a shopping trip—and not at all on the extensive margin—the likelihood of going food shopping.