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

Robert Vincent Breunig () and Indraneel Dasgupta ()

No 469, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Social Sciences, Australian National University

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.

Keywords: Food Stamp Program; Welfare Transfers; Cash-out Puzzle; Cournot Model; Intra-household Distribution; Engel Curves (search for similar items in EconPapers)
JEL-codes: H23 H31 I38 J16 (search for similar items in EconPapers)
Date: 2003-10
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Persistent link: http://EconPapers.repec.org/RePEc:auu:dpaper:469

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