The Economics of Food Vendors Specialized to Serving the Women, Infants, and Children Program

Abstract

AbstractThis paper focuses on the impacts of food vendors that have emerged primarily or exclusively to redeem benefits for the Women, Infants and Children (WIC) Program. Federal regulations impose strict requirements on state WIC agencies which authorize vendors that derive more than 50% of their food sales through WIC. Such vendors are commonly known as above‐50 or A50 vendors, and most state WIC agencies do not authorize them. Using extensive transactions‐level data for the Greater Los Angeles area (GLA), we examine A50 vendors’ performance in the WIC program, including their pricing behavior relative to other WIC vendors in a but‐for world where A50 vendors are not authorized. We also conduct econometric tests designed to gauge A50 vendors’ impacts on WIC program access and participation, and costs charged for WIC foods by other program vendors. Results indicate that A50 vendors operating in GLA (a) modestly reduced WIC program food costs relative to a but‐for world where they were not authorized, (b) had a modest pro‐competitive effect on the pricing behavior of small, non‐A50 vendors, which have tended to charge the highest absolute prices for WIC foods in California, (c) caused a modest reduction in participant travel distance (and, hence, transaction costs), and (d) appear to have facilitated participant access. On balance, our results suggest that A50 vendors can improve the food‐delivery environment for the WIC program and facilitate participant access to WIC benefits without imposing additional food costs on the program.