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How Do Government Transfer Payments Affect Retail Prices and Welfare ? Evidence from SNAP

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  • Leung,Justin H.
  • Hee Kwon (Samuel) Seo

Abstract

This paper studies the effect of the Supplemental Nutrition Assistance Program (SNAP) on retailprices in the United States. State-level program adjustments motivate the identification strategy. A 1 percent increasein benefits per population raises grocery prices by a persistent 0.08 percent. A calibrated partial-equilibriummodel implies a marginal benefit dollar raises a recipient’s consumer surplus from groceries by $0.7, producer surplus by$0.5, and lowers each non-SNAP consumer’s surplus by $0.05, because of a large marginal propensity to consume food outof SNAP, low elasticities of demand, and moderate market power. To guarantee the real intended spending power onfood, benefits should be increased by 7 percent.

Suggested Citation

  • Leung,Justin H. & Hee Kwon (Samuel) Seo, 2022. "How Do Government Transfer Payments Affect Retail Prices and Welfare ? Evidence from SNAP," Policy Research Working Paper Series 10075, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10075
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