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Paper by Prina, Marks & Gernhardt forthcoming in Review of Economics of the Household

A paper co-authored by Associate Professor Mindy Marks, Professor Silvia Prina, and PhD candidate Roy Gernhardt has been accepted for publication in the Review of Economics of the Household. The paper, titled “Government Shutdown and SNAP Disbursements: Effects on Household Expenditures,” provides significant insights into the Supplemental Nutrition Assistance Program (SNAP) and its impact on household spending behavior during unexpected income shocks.

Abstract

We test the ability of SNAP eligible households to smooth consumption when facing unexpected transitory income shocks stemming from the 2018-19 government shutdown. In response to the shutdown, all states were federally mandated to pay February SNAP benefits on or before January 20th. This created a short-term windfall (two payments very close to each other) followed by a longer than normal gap during which no SNAP disbursements were received. We show that expenditures are lower in the month where benefits where advanced vis-à-vis months with unaltered benefits schedules. We complement this finding by exploiting preexisting state-level differences in disbursement schedules that drove some states to temporarily alter the timing of the 2019 March and April SNAP disbursements. These diff-in-diff results show that households in treated states reduced spending when there was a longer than usual gap between SNAP disbursements. Our findings are inconsistent with the permanent income hypothesis.

Link to SSRN paper posting

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