THE EFFECT OF FOOD STAMPS ON SPENDING FOR GROCERY PRODUCTS

Abstract

We constructed demographic profiles of each market area by aggregating circa-1990 county US census data. We constructed a measure for market level food stamp benefits using 1990 county-level food stamp benefit data supplied by the USDA. This is the key explanatory variable in regressions in which sales of many specific foods and food aggregates are regressed on food stamp benefits and a large number of demographics, including a measure of poverty. The percent of grocery sales accounted for by food stamps ranged from less than two in the Boston area to more than ten in Shreveport. The primary interest is to evaluate the extent to which differences in food stamp usage across market areas alters the relative sales of grocery products. Because food stamps are a food-specific increase in income, we might expect a shift into more desirable, income-elastic grocery categories, perhaps more nutritious ones. We examine major food categories and find effects in the expected direction, in some cases significant. Focusing on nutrition, we examine sales of particular cereal brands, for which we have detailed sales and nutrition content data. No strong impacts are found. The second interest is the food buying habits of low income buyers in general and food stamp users in particular. It is commonly felt that low income households are necessarily more adroit food shoppers and will tend to buy more economical versions of their choices. However, there is little evidence of this. Indeed, it has been repeatedly found that low income buyers are less likely to substitute private labels goods for their branded counterparts. We study the role of food stamp and poverty in differences across markets on private label share of 71 grocery categories. A recent study by Gundersen and Oliveira might suggest that food stamp users are more likely to watch the food budget than are low income nonusers, suggesting different effects. Essentially this is what is found, for the ceteris paribus impact of poverty is to reduce sales of private label products, but if anything those using food stamps tend to buy them.Food Consumption/Nutrition/Food Safety,