Unraveling the Impact of SNAP on Household Non-Food Expenditure: An Instrumental Variables Approach

Abstract

Abstract This study investigates the causal effects of SNAP participation on household expenditures, with a central focus on non-food related expenditures. We examine total non-food spending as well as six subcategories of non-food expenditures using the 2000–2011 waves of the Consumer Expenditure Survey (CE). Selection into SNAP is addressed by employing an IV approach that exploits variation in state-level policies and program administration to instrument for SNAP participation, conditional on household and state-level characteristics. Respondent misreporting is addressed by adopting an approach based on parametric methods for misclassified binary dependent variables that produces consistent estimates when using instrumental variables. The analyses reveal that, after adjusting for misreporting, SNAP participation among low-income households increases expenditure on non-food by 27 percent, while increasing expenditure on food by nearly 41 percent per year. The results indicate that SNAP participation significantly increases most of the non-food subcategories. The results are generally similar but measured less precisely when separately examining households with and without children. Overall, the findings of this study indicate that SNAP is serving its intended purpose of increasing household expenditures on food, while also allowing households to allocate some of their income to various non-food spending categories.