Job Market Paper

Abstract: Monthly income fluctuates by about 20 percent on average from the annual mean for households below the poverty line and the concern is that these households face considerable consumption volatility as a result. This paper studies how state level expansions in SNAP eligibility (formerly the Food Stamp Program) between 1996 and 2011 have affected household income volatility using the Survey of Income and Program Participation (SIPP). I use a reduced form simulated instrument approach to isolate the impact of household eligibility gain on overall and non-SNAP income volatility (which captures the household behavioral response). My simulated instrument captures eligibility changes induced by state level changes to vehicle, asset and permanent resident eligibility rules. I further investigate household behavioral changes that are likely to be affected by the program, including to hours worked and participation in other social safety net programs. I find that SNAP eligibility reduces total household income volatility of single mothers by a non-statistically significant 11 percent. The stabilizing nature of the SNAP benefit formula contributes to about a quarter of this reduction. These results are smaller than the 12-18 percent non-causal estimates of the impact of the receipt of SNAP benefits on income volatility previously found in the literature.