Work incentives and the Food Stamp Program

Labor supply theory makes strong predictions about how the introduction or expansion of a social welfare program impacts work effort. Although there is a large literature on the work incentive effects of AFDC and the EITC, relatively little is known about the work incentive effects of the Food Stamp Program and none of the existing literature is based on quasi-experimental methods. We use the cross-county introduction of the program in the 1960s and 1970s to estimate the impact of the program on the extensive and intensive margins of labor supply, earnings, and family cash income. Consistent with theory, we find reductions in employment and hours worked when food stamps are introduced. The reductions are concentrated among families headed by single woman.

► We examine the impact of the food stamp program on labor supply decisions.
► We use a quasi-experimental approach, leveraging variation across time and space in the introduction of the program.
► Theory predicts that employment and hours worked will decrease in response to an income-transfer program.
► We find reductions in employment and hours worked that are concentrated among single-parent families.