Consumer Response to Monetary Subsidies: A Structural Demand Analysis of the Supplemental Nutrition Assistance Program.

This article analyzes consumer responses to alternative designs of the Supplemental Nutrition Assistance Program (SNAP) by modeling how spending restrictions affect food purchases and consumer welfare. Using a structural direct utility model that integrates consumer choices across brands, categories, and stores, the study simulates counterfactual subsidy scenarios—including standard SNAP benefits (food only), expanded grocery subsidies (food and household items), and unrestricted cash benefits—based on household panel data from two U.S. markets. Findings indicate that SNAP benefits increase food spending with a marginal propensity to consume food (MPCF) of about 0.34, higher than that for grocery subsidies (0.30) and cash benefits (0.26), but only about 70% of the subsidy is spent, with significant spillovers to non-covered categories and outside goods. From a welfare perspective, consumers value the flexibility of unrestricted cash benefits, with $100 in SNAP benefits being roughly equivalent to $29 in cash, a difference partly explained by travel costs to stores. The study highlights trade-offs between policy goals and consumer welfare, providing detailed insights into how subsidy design influences purchasing behavior and welfare, while acknowledging limitations such as geographic scope and unmodeled supply-side responses.