Event: Department Seminar

Location: 368A Heady Hall

Contact Person: Katie Harris-Lagoudakis

Title: Liquidity constraints and the SNAP cycle for households with children

Abstract: Low-income households are often observed to spend and consume quickly after payments. Monthly benefit redemption by participants in the Supplemental Nutrition Assistance Program (SNAP)  matches this general pattern - a pattern known as the SNAP cycle. We examine how changes to household liquidity influence how quickly SNAP households redeem benefits at stores. We use a unique dataset that allows us to completely observe SNAP spending relative to benefit payments for a large sample of SNAP households. To examine changes in liquidity, we estimate changes in SNAP spending over months with Earned Income Tax Credit payments versus other months. In addition to estimating mean effects of changes to liquidity on the SNAP cycle, we estimate  effects for households spanning the quantiles of the distribution of benefit redemption as well as changes in the SNAP cycle across the entire benefit month. We find that increases in liquidity dampen the SNAP cycle, reducing the share of benefits redeemed in the first week of the benefit month. This effect is driven by individuals who spend a lot of their benefits in the first week reducing their first-week redemptions. Our results suggest that increasing households' liquidity can dampen, but not eliminate, patterns of non-smooth food expenditure among SNAP participants.