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Welfare Transfers and Intra-Household Trickle Down: A Model with Evidence from the US Food Stamp Program

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  • Robert Breunig
  • Indraneel Dasgupta

Abstract

We examine the case for maintaining welfare and income redistribution programs even when their adverse general equilibrium effects reduce total earnings of poor households. Using a Cournot model of intra-household decision-making, we show that even if welfare cutbacks generate large increases in household income, these may still reduce the well-being of children and elderly dependants. Our model also explains the higher marginal propensity to consume food out of food stamps in the US, compared to that out of market income, noted in earlier empirical studies. We find evidence consistent with our argument in data from a US Food Stamp experiment.

Suggested Citation

  • Robert Breunig & Indraneel Dasgupta, 2003. "Welfare Transfers and Intra-Household Trickle Down: A Model with Evidence from the US Food Stamp Program," CEPR Discussion Papers 469, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:469
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP469.pdf
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    1. Kiratu, Nixon Murathi & Mshenga, Patience M. & Ngigi, Margaret, 2016. "Determinants of smallholder farmers’ perception towards smart subsidies; a case of Nakuru Noth district, Kenya," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249316, African Association of Agricultural Economists (AAAE).
    2. Murathi Kiratu, Nixon, 2014. "An Assessment of the Impact of Kilimo Plus Subsidy Program on Smallholder Farmers' Food Security and Income in Nakuru North District, Kenya," Research Theses 243470, Collaborative Masters Program in Agricultural and Applied Economics.

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    More about this item

    Keywords

    Food Stamp Program; Welfare Transfers; Cash-out Puzzle; Cournot Model; Intra-household Distribution; Engel Curves;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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