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Give & Take? Child Benefits & Prices in Northern Canada

Author

Listed:
  • Nicholas Li

    (Department of Economics, Toronto Metropolitan University, Toronto, Canada)

  • Angela Daley

    (Department of Economics, University of Maine, Orono, Maine, USA)

  • Barry Watson

    (Department of Economics, Acadia University, Wolfville, Nova Scotia, Canada)

Abstract

Cost of living is comparatively high in Northern Canada, which is a remote and sparsely populated region served by retail oligopolies (about 34 percent of communities feature a monopoly, while the rest feature a duopoly). Government transfers constitute a large share of household income in Northern communities, and child benefits are particularly important, with these programs having expanded in recent years (Universal Child Care Benefit in 2015 and Canada Child Benefit in 2016). We assess the extent to which increased child benefits are “captured†by higher prices. Using the Longitudinal Administrative Database and community-level data on prices and food shipments from Nutrition North Canada (2012-2019), we find that expanded child benefits are associated with higher prices (with an elasticity of 0.02), which for a family of four, offset about 24 percent of the increased purchasing power resulting from the expansion. Our results suggest that expanded child benefits increase food demand and that the main transmission mechanism leading to higher prices is markups, as our price effects hold conditional on the quantity of food shipped and are mostly driven by monopoly communities where about 61 percent of increased purchasing power is offset by higher food prices. Thus, Northern communities are not pure “pricetakers†and policies that increase cash assistance should consider the implications for local prices.

Suggested Citation

  • Nicholas Li & Angela Daley & Barry Watson, 2024. "Give & Take? Child Benefits & Prices in Northern Canada," Working Papers 093, Toronto Metropolitan University, Department of Economics.
  • Handle: RePEc:rye:wpaper:wp093
    as

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    File URL: https://www.arts.ryerson.ca/economics/repec/pdfs/wp093.pdf
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    References listed on IDEAS

    as
    1. Justine Hastings & Jesse M. Shapiro, 2018. "How Are SNAP Benefits Spent? Evidence from a Retail Panel," American Economic Review, American Economic Association, vol. 108(12), pages 3493-3540, December.
    2. Nicholas Li & Bela Georgiev, 2024. "Traditional Indigenous foodways and retail subsidies: Evidence from the Northwest Territories Community Survey and Nutrition North Canada," Working Papers 094, Toronto Metropolitan University, Department of Economics.
    3. Orazio Attanasio & Elena Pastorino, 2020. "Nonlinear Pricing in Village Economies," Econometrica, Econometric Society, vol. 88(1), pages 207-263, January.
    4. Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael Walker, 2022. "General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya," Econometrica, Econometric Society, vol. 90(6), pages 2603-2643, November.
    5. Jonathan Rhys Kesselman, 2019. "Policy Options for Retargeting the Canada Child Benefit," Canadian Public Policy, University of Toronto Press, vol. 45(3), pages 310-328, September.
    6. Paniz Najjarrezaparast & Krishna Pendakur, 2021. "How Did the Canada Child Benefit Affect Household Spending?," Canadian Public Policy, University of Toronto Press, vol. 47(4), pages 479-496, December.
    7. Leung, Justin H. & Seo, Hee Kwon, 2023. "How do government transfer payments affect retail prices and welfare? Evidence from SNAP," Journal of Public Economics, Elsevier, vol. 217(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Northern Canada; Subsidies; Prices; Competition; Monopoly;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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