ECONOMIC INCENTIVES FOR DIETARY IMPROVEMENT AMONG FOOD STAMP RECIPIENTS

I. INTRODUCTION There are major dietary inadequacies facing Americans--high intake of fat and saturated fat, and low intake of fiber- and calcium-containing foods, such as fruits, vegetables, whole grains, and milk. During 1999-2000, only one in ten Americans had a good diet (Basiotis et al., 2002). Dietary inadequacies have been linked to several chronic diseases, including coronary heart disease, cancer, stroke, diabetes, hypertension, overweight, and osteoporosis. These diet-related problems are costly to the society. For example, diet-related premature deaths from coronary heart disease, cancer, stroke, and diabetes are estimated to account for 5.3% of all deaths in the United States and cost the society $71 billion in 1995 (Frazao, 1999). The medical costs of obesity were estimated to be as high as $78.5 billion in 1998 and were predicted to reach $147 billion per year by 2008 (Finkelstein et al., 2009). The need to identify effective intervention strategies to alleviate the costly diet-related health problems is a priority for the public. Diet quality is particularly poor among low-income Americans, reflected in their underconsumption of fruits, vegetables, and milk (Lin, 2005). To help low-income Americans achieve a healthy, balanced diet, the U.S. Department of Agriculture (USDA) administers 15 domestic food and nutrition assistance programs, costing $61 billion in 2008 (USDA, 2009). In 2005, the Institute of Medicine (2005) recommended issuing vouchers redeemable for fruit and vegetable purchases in order to increase fruit and vegetable consumption among participants in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). The Federal Government has also implemented the WIC Farmers' Market Nutrition Program, the Senior Farmers' Market Nutrition Program, and informational campaigns to increase fruit and vegetable consumption among food assistance recipients (USDA, 2004). The Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) is the cornerstone of the Federal food assistance programs, accounting for 62% of USDA's total food assistance costs and serving 28.4 million Americans each month in 2008. It has been documented that food stamp recipients consumed fewer servings of fruits and vegetables than income-eligible nonparticipants as well as the income ineligible (Fox and Cole, 2004). To help food stamp participants make more nutritious food choices, the USDA has expanded its nutrition education program by increasing funding from $0.66 million in 1992 to $247 million in 2006 (Guthrie et al., 2007). Two economic intervention strategies have been contemplated to help food stamp recipients make more nutritious food choices. One strategy is to increase overall food spending by increasing food stamp benefits. This is a nontargeted strategy. The alternative is a targeted strategy which subsidizes the consumption of healthy foods such as fruits, vegetables, and dairy products and taxes the consumption of less healthy foods such as salty snacks (Kuchler, Tegene, and Harris, 2005; Guthrie et al., 2007). The objective of this study is to estimate the size of consumer response to and the cost associated with these two strategies--increasing food stamp benefits and subsidizing the purchase of healthy food. Specifically, we estimate the costs of narrowing the gap between current consumption and dietary recommendation for the two strategies. These cost measures serve as the basis for comparing the effectiveness among alternative strategies. It is important to examine the dietary and health benefits associated with increased consumption of fruits, vegetables, and dairy products, but this is beyond the scope of this paper. To accomplish the objective, we undertake several tasks. First, to examine demand responses to the incentives, we estimate a system of food demand equations for food stamp households to obtain demand elasticities. …