Issue: Benefits and costs are important considerations

when making program decisions. In 2000, the direct costs

of the U.S. Department of Agriculture’s three largest food

assistance programs (food stamps, school meals, and the

Special Supplemental Nutrition Program for Women,

Infants, and Children (WIC)) were $28 billion. While the

costs of these programs are readily measurable, it is more

difficult to estimate the value of the benefits for program

participants. The Economic Research Service recently

conducted several studies examining how food assistance

programs affect the well-being of low-income families.

The studies looked specifically at several dimensions of

well-being, including food security, nutrient intake, food

expenditures, and poverty.

Background: USDA food assistance programs provide

needy people with access to nutritious foods. The largest

program is the Food Stamp Program. The primary goal of

the Food Stamp Program is to provide basic protection

against hunger for low-income Americans of all ages and

household types. Food stamps help eligible individuals

obtain a more nutritious diet by providing benefits for

purchases of food at grocery stores. 

To receive food stamps, a household must be both incomeand asset-poor (in addition to meeting citizenship and

work requirements). For most households, this means

gross income levels of less than 130 percent of the poverty

line and assets below $2,000. The amount of food stamp

benefits a household receives declines as household

income rises. 

WIC provided nutritious foods to about 7.3 million participants per month in 2001. WIC’s mission is to safeguard

the health of low-income women, infants, and children 

up to age 5 who are at nutritional risk by providing 

nutritious foods to supplement diets, information on

healthy eating, and referrals to health care. 

To qualify for WIC, individuals must be nutritionally “at

risk” and either be in families with incomes less than 185

percent of the poverty line or be receiving Medicaid benefits. Unlike the Food Stamp Program’s sliding benefit

scale, WIC benefits do not vary with income.

According to ERS estimates, in 2000, more than 33

million people experienced food insecurity at some time

during the year. Those households were uncertain of

having or unable to acquire a supply of food sufficient to

meet basic needs at all times because of inadequate

resources. Since the primary goal of the Food Stamp

Program is to provide a safety net against hunger, an

important issue for policymakers is the effectiveness of

food stamps in attaining this goal. In 2000, more than 17

million people in the United States received food stamps.

Studies of food insecurity consistently find that food

stamp recipients are more likely to be food insecure than

nonrecipients. Furthermore, even when households with

similar observed characteristics (such as education,

income, size of household) are compared, food stamp

participants are more likely to be food insecure than

nonparticipants. This puzzling result led ERS to conduct

further analysis. 

Research suggests that the relatively high rates of food

insecurity among food stamp participants may arise from

who chooses to participate in the program rather than the

effect of the program. As might be expected, food-insecure

households may seek out the program and be more likely

to participate than food-secure households. If this is the

case, an analysis of the effect of food stamps on food

United States

Department of

Agriculture

Economic 

Research

Service

How Do Food Assistance Programs Improve

the Well-Being of Low-Income Families?

Joshua Winicki, Dean Jolliffe, and Craig Gundersen

Food Assistance and Nutrition Research Report Number 26-9 September 2002

IN FOOD ASSISTANCE

1 The Food Stamp Program and Food Insecurity

Findings:
security would find food stamps to decrease food security.

Statistical analysis should take into account the effect of

food security on the food stamp participation decision

when estimating the effect of food stamp participation on

food security. In a fully controlled research experiment, it

would be possible to compare families that are identical

except for their FSP participation status. Because data

from this type of experiment do not exist, statistical techniques need to be used in lieu of the control or the

randomization of experiments.

Using a statistical technique that accounts for the selfselection of food-insecure households into the Food Stamp

Program, recent research finds that food stamp recipients

are no more likely than eligible nonrecipients to be food

insecure. Thus, the Food Stamp Program does not erode a

household’s food security, contrary to the possible implications of the comparison of food insecurity levels of food

stamp recipients with those of low-income households

whose members do not receive food stamps.

Comparisons reveal that WIC has a positive effect on WIC

participants’ nutritional intake. Despite their more disadvantaged settings, children who are WIC participants consume

more than noneligible children do of several key nutrients,

including iron, folate, and vitamins B6, C, and A.1

One interpretation of these comparisons is that WIC

improves the diet of its participants. Another interpretation,

however, is that health-conscious, low-income parents—

whose children probably would have relatively high nutrient

intake anyway—are more likely than less health-conscious,

low-income parents to participate in WIC with their children.

If so, low-income, health-conscious families would have

more healthful diets than low-income, less health-conscious

families, regardless of WIC participation. This is another

example of the statistical problem of self-selection bias. To

correct for this possible effect, ERS researchers examined a

sample of children living in households in which a person

other than the child is on WIC. Such a person could be an

infant or a pregnant or postpartum woman. This way, a

comparison can be made between the nutrient intake of children receiving WIC benefits and children not receiving WIC

benefits. The “control group” of children not receiving benefits live in a home not only eligible but also with similar

nutritional motivations as the treatment group since other

members of the control-group homes are receiving WIC

benefits. Statistically significant results show that WIC

participation has positive benefits on the children’s 

nutritional intake.

Food stamp benefits can only be used to purchase food.

If the total value of food stamps provided to a household

is greater than the amount that the household would

normally spend on food, a reasonable assumption is 

that the household is spending more on food using food

stamps than if it just received cash instead. However, if 

the total value of food stamps is less than the amount

normally spent on food, one could conjecture that the

household’s food spending would be the same whether

the household received food stamps or a cash transfer. A

standard economic argument predicts both of these

outcomes. But studies have found substantially higher

rates of food spending by FSP food stamp participants

when the participants used food stamps rather than cash.

This somewhat counterintuitive result is referred to as the

“cash-out puzzle.”

An elaboration of this idea addresses the cash-out puzzle

by defining separate variables to represent spending on

food from food stamps versus from cash. This distinction

allows for different spending patterns for food purchased

with food stamps versus food paid for with cash. With

this model and data from a cash-out demonstration in

San Diego, researchers found that receiving food stamps

increased a household’s food spending by an amount

greater than that of an equivalent cash transfer. This

result also occurred when the total value of food stamps

received was less than a household’s typical expenditure

on food. 

The cash-out puzzle may be linked to household structure.

Single, female-headed households in the San Diego cashout experiment spent the same amount on food whether

benefits were distributed as cash or as food stamps. For

those households, there was no cash-out puzzle. Multiadult households, on the other hand, spent less on food if

benefits were distributed as cash. Thus, the cash-out

puzzle is primarily observed in multi-adult households.

The difference between the behavior of single, femaleheaded households and multi-adult households may be due

to the presence of a single decisionmaker in the former

and to intra-household relationships and budgeting controversies among adults in the latter. Whatever the reason,

any program change to distribute cash rather than food

stamps is likely to result in reduced food intakes for multi2 Economic Research Service / USDA

How Do Food Assistance Programs Improve the Well-Being of Low-Income Families? / FANRR-26-9

1 For example, in comparison with noneligibles, WIC participants are

more likely to be in households headed by single parents with low 

education levels.

2 Food Assistance Programs and Nutrient Intake

3 The Food Stamp Program and Food Expenditures
adult households. If children in multi-adult households

receive more food when the benefit is in the form of food

stamps rather than cash, then USDA may have a

compelling reason to retain the use of in-kind benefits.

The Food Stamp Program is an integral part of the social

safety net. Recent ERS research examines the effect of

food stamps on poverty and child poverty rates by considering a definition of family resources that adds the value

of food-stamp benefits to family income. This modified

definition of resources sheds light on the efficacy of food

stamps in helping families meet basic needs. The results

indicate that food stamps do not dramatically reduce the

incidence of poverty and child poverty, as measured by the

percentage of people who are poor, but they do significantly reduce the depth and severity of poverty. In 2000,

16 percent of all children were poor. This research shows

that if the definition of income used to measure poverty

also included the value of food stamps, then 15.4 percent

of all children would be deemed poor. Food stamp benefits

reduced the incidence of poverty by 4 percent. 

Examining the reduction in the percentage of the population

living in poverty is not an accurate measure of how food

stamps help to ameliorate poverty, however. This is largely

because the value of food stamp benefits declines as a

household’s income increases, and while many poor people

become less poor due to food stamps, very few poor households receive enough food stamps to lift them above the

poverty line. To determine how food assistance programs

contribute to the well-being of low-income households,

researchers examined two poverty measures that are sensitive to the distribution of income of poor persons. 

The first measure, called the poverty-gap index, measures

the depth of poverty. This index is found by first measuring the income gap, or the distance below the poverty

line expressed as a proportion of that line, for all poor

persons. The poverty-gap index is then the average value

of the income gaps, where the average is formed over the

entire population, counting the nonpoor as having zero

income gap. Between 1988 and 2000, the average change

in the poverty-gap index from adding the value of food

stamp benefits to income was a decline in child poverty of

20 percent. 

The second measure, the squared poverty-gap index, is the

mean value of the squared income gaps. This measure is

said to reflect the severity of poverty as it will be sensitive

to (mean-preserving) changes in the distribution of income

of the poor. The effect of food stamps on the average

decline in this measure of child poverty is 28 percent. The

value of these two measures of child poverty is that they

indicate the important role food stamps play in reducing

poverty and improving the well-being of poor persons.

Conclusion: Policymakers need accurate information on

both the benefits and costs of food assistance programs.

ERS research has demonstrated the benefits of food assistance programs on various outcomes, including the alleviation of poverty and increases in food expenditures. The use

of more sophisticated models by ERS researchers also has

enabled policymakers to understand why some counterintuitive negative effects of food assistance on various outcomes

emerge when using bivariate or simple multivariate statistical models. With the use of new data sets, more recent data,

and sophisticated econometric techniques, future ERS

research on the benefits of food assistance programs will

further inform the decisions of policymakers.

Information Sources:

Andrews, Margaret, Mark Nord, Gary Bickel, and Steven

Carlson, Household Food Security in the United States,

1999. FANRR-8. U.S. Department of Agriculture,

Economic Research Service, 2001.

http://www.ers.usda.gov/publications/fanrr8

Breunig, R., I. Dasgupta, C. Gundersen, and P. Pattanaik,

Explaining the Food Stamp Cash-Out Puzzle. FANRR-12.

U.S. Department of Agriculture, Economic Research

Service, 2001.

http://www.ers.usda.gov/publications/fanrr12

Gundersen, C., and V. Oliveira, “The Food Stamp Program

and Food Insufficiency,” American Journal of Agricultural

Economics (83)4: 875-887, 2001. Summary available at:

http://www.ers.usda.gov/publications/erselsewhere/eejs0202 

Jolliffe, D., C. Gundersen, L. Tiehen, and J. Winicki, Food

Stamp Benefits and Child Poverty in the United States: An

Examination of Food Stamp Efficacy in Alleviating Child

Poverty. U.S. Department of Agriculture, Economic

Research Service (forthcoming).

Levedahl, W. J., “A Theoretical and Empirical Evaluation

of the Functional Forms Used to Estimate the Food

Expenditure Equation of Food Stamp Recipients,”

American Journal of Agricultural Economics (77)4:

960-968, 1995.

Oliveira, V., and C. Gundersen, WIC and the Nutrient

Intake of Children. FANRR-5. U.S. Department of

Agriculture, Economic Research Service, 2000.

http://www.ers.usda.gov/publications/fanrr5

How Do Food Assistance Programs Improve the Well-Being of Low-Income Families? / FANRR-26-9

Economic Research Service / USDA 3

4 The Food Stamp Program and Child Poverty
How Do Food Assistance Programs Improve the Well-Being of Low-Income Families? / FANRR-26-9

4 Economic Research Service / USDA

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