March 15, 2017
"Hastings and Shapiro suggest that people are using so-called mental accounting, meaning that they think separately about different sources of income, or different assets they own, or different decisions they make."
Noah Smith, Bloomberg
Originally created by President Lyndon B. Johnson, the 1964 Food Stamp Act aimed to “enable low-income families to increase their food expenditures.” The successor to the Food Stamp Program, the Supplemental Nutrition Assistance Program (SNAP), supplies millions of Americans with a monthly stipend for food assistance in the form of electronic benefit transfer (EBT) cards. A new study, “How Are SNAP Benefits Spent? Evidence from a Retail Panel,” created by University economists Justine Hastings and Jesse Shapiro, analyzed data of more than 500 million transactions at a single grocery retail chain over a six year span to learn more about users’ shopping habits.
Hastings and Shapiro determined that SNAP has a larger effect on food spending than an equivalent cash benefit, and that in receiving SNAP benefits households are less likely to buy store brands or use coupons on SNAP-eligible products. Although the first finding varies from the outcome that earlier economic models have predicted, it’s the second finding that’s surprising and may indicate an important role for consumer psychology in understanding the effects of the program.
To read the full study, click here.
Coverage of the study includes: