How Do Government Transfer Payments Affect Retail Prices and Welfare? Evidence from SNAP

We study the effect of the Supplemental Nutrition Assistance Program (SNAP)on retail prices nationwide. Program adjustments at the state level motivate ouridentification strategy. A 1% increase in benefits per population raises grocery prices bya persistent 0.08%. A calibrated partial-equilibrium model implies a marginal benefitdollar raises a recipient's consumer surplus from groceries by $0.7, producer surplusby $0.5, and lowers each non-SNAP consumer's surplus by $0.06, because of a largemarginal-propensity-to-consume-food out of SNAP, low elasticities of demand, andmarket power. To guarantee the real intended spending power on food, benefits shouldbe increased by 10%