Do Intra‐Household Effects Generate the Food Stamp Cash‐Out Puzzle?

Previous empirical studies have noted the higher marginal propensity to consume food out of food stamps in the United States, compared to that out of cash income. Analyzing data from U.S. Food Stamp Program participants, we find evidence that this discrepancy may be driven primarily by the behavior of multiple‐adult households. Single‐adult households show no evidence of any discrepancy. Thus, our results suggest that food stamp and cash income (welfare or market) may have very different impact on the intra‐household allocation process, and that this is reflected empirically in the cash‐out puzzle.