Food stamp research : results from the Income Survey Development Program and the promise of the survey on income and program participation

              ft~ United States
~~i~g 1 Department of
~ Agriculture
Food and
Nutrition
Service
Office of
Analysis and
Evaluation
Food Stamp Research:
Results from the Income
Survey Development Program
and the Promise of the
Survey on Income and
Program Participation
r •
1 I ,. .. I I
J : I l-
PREFACE
This report was prepared by Mathematica Policy Research under
contract no. FNS 53-3198-5-20 from the U.S. Department of
Agriculture, Food and Nutrition Service, Office of Analysis and
Evaluation.
This report represents a team effort in which a number of
individuals made important contributions in addition to the
authors. We gratefully acknowledge their assistance. We
particularly want to acknowledge the sustained help and
encouragement of Steven Cole of the Food and Nutrition Service.
The authors would also like to thank the individuals from
Mathematica Policy Research who helped with this report: John
Czajka, Pat Doyle, Tom Fraker and Irene Lubitz contributed
important advice and materials; and Lucia Wesley and the
secretarial staff typed and formated the manuscript.
March 1986
Sharon Long
Harold Beebout
Felicity Skidmore
CONTENTS .
I.
II.
Ill.
IV.
v.
OVERVIEW • ••••••••••••••••••••••••••••••••••••••••• 1
A. Promise of SIPP............................... 1
B. Background. • • • • • • • • . • • • • • • • • • • • • • • • • • • • • • • • • • • 1
C. Objectives of this Monograph.................. 5
D. Organization of this Monograph................ 5
THE SIPP AND ISDP SURVEYS ••••••••••••••••••••••••• 6
A. The History of SIPP••••••••••••••••••••••••••• 6
B. The 1979 ISDP Research Panel.................. 7
C. The Structure and Contents of SIPP............ 10
ECONOMIC STATUS OF TH.E FOOD STAMP TARGET
POPULATION. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 11
A. Asset Holdings of Food Stamp Participant and
B.
Nonparticipant Households •••••••••••••••••••
The Pattern and Adequacy of Multiple
11
Program Benefits............................ 14
c. Multiple Program Benefits During the Course
of a Year................................... 20
THE DYNAMICS OF FOOD STAMP RECIPIENCY ••••••••••••• 24
MONTHLY PATTERNS OF INCOME RECEIPT •••••••••••••••• 30
VI. PROGRAM PARTICIPATION AND LABOR SUPPLY BEHAVIOR
VII.
VIII.
OF FOOD STAMP HOUSEHOLDS•••••••••••••••••••••••• 35
A. Determinants of Participation in the
B.
Food Stamp Program ••••••••••••••••••••••••••
The Effects of Food Stamp Participation On The
Market Labor of Female Heads of Household •••
ISSUES IN THE USE OF PANEL DATA •••••••••••••••••••
35
38
45
A. Analytical Issues............................. 45
B. Data Issues................................... 58
ISDP RESEARCH AND THE PROMISE OF SIPP ••••••••••••• 65
REFERENCES. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 6 6
LIST OF FIGURES
APPENDIX FIGURE A- SURVEY WAVES-- SIPP THROUGH 1984 •••• A-1
, ..
LIST OF TABLES
APPENDIX TABLE A - SUMMARY OF THE METHODOLOGY OF
MULTIVARIATE STUDIES ON THE DYNAMICS OF FOOD
STAMP PROGRAM PARTICIPATION•••••••••••••••••••••••••••• A-4
APPENDIX TABLE B - SUMMARY OF THE METHODOLOGY OF
MULTIVARIATE STUDIES ON THE DYNAMICS OF AFDC
PROGRAM PARTICIPATION•••••••••••••••••••••••••••••••••• A-8
I. OVERVIEW
A. PROMISE OF SIPP
A major new data collection effort by the Census Rureau has
enormous promise as the base for analyses of who the Food Stamp
Program is serving and how effectively the program is achieving
its purpose of raising the food purchasing power of low-income
households. This data collection effort is the Survey of Income
and Program Participation (SIPP) which, in the 1984 panel, is
following a sample of more than 20,000 households, collecting
detailed data on economic and household characteristics on a
month-by-month basis over two and one-half years. The wealth of
longitudinal behavioral data potentially available from SIPP for
addressir~ questions related to eligibility and participation in
food stamps and other programs is much richer than any previous­ly
available data. ~or the first time the actual behavior of
households and individuals can be traced over time and poten­tially
valuable new insights gained about the monthly patterns
of household composition, income change, receipt of program
benefits, and program turnover. Such new insights should in
turn lead to improved targeting of program benefits, better
estimates of program cost, and improved measures of the adequacy
of program benefits in fulfilling program objectives. This
ability to address a more comprehensive set of program questions
using SIPP should provide a basis for better informed policy
decisions.
B. BACKGROUND
Prior to SIPP, the analysis of the Food Stamp Program (FSP) as
well as other income transfers and human resource programs was
limited by the lack of income data. The maiority of policy
research relied on the March Income Supplement to the Current
Population Survey (CPS) and the Integrated Quality Control
System data base (IQCS), although some studies used the smaller
Michigan Panel Study of Income Dynamics (PSID).
March CPS. The March CPS, also known as the Annual Demographic
File, is an annual survey of a nationally representative sample
of about 60,000 households and three times as many persons. The
March survey collects a substantial amount of information for
households, families, and individuals, including:
o Employment status, occupation and industry, hours worked
o Earnings, other income, program participation
o Age, race, sex, marital status, ethnicity, education.
However, the income data available from the CPS has several
limitations since the primary focus of the survey is to obtain
estimates of the size and characteristics of the labor force.
2
First, the income measures from the CPS are for the previous
calendar year (i.e., the March 1985 CPS asked questions about
income received in 1984). This can lead to severe recall
problems for the survey respondents. Second, the survey asks
about income received from groups of income sources, where the
income groups are not necessarily the combinations needed in
addressing policy issues. Further, there is little redundancy
in the income questions, reducing the extent to which the
accuracy and completeness of the data can be checked. Finally,
the CPS is not truly a longitudinal file since households are
not followed for long periods of time, rather, the CPS is a
series of successive cross-sectional files.
IQCS. The IQCS is an administrative file used to estimate the
amount of food stamp and Aid to Families with Dependent Children
(AFDC) benefits issued in error on a state by state basis. The
data is obtained from reviews of a sample of 150 to 1,200 cases
(i.e., program participant households) in each state over a six
month period on a continuing basis. The full sample consists of
approximately 45,000 cases. As a byproduct, the IQCS provides a
source of detailed monthly data on the characteristics of par­ticipants
in the FSP and AFDC, including:
o Employment status, work registration
o Earnings, other income, program participation
o Assets; shelter, medical care and dependent care expenses
o Age, race, sex, marital status, ethnicity.
Although the IQCS provides all the detailed information needed
to determine the household's eligibility for food stamps, the
file is limited to food stamp and AFDC participant hous~holds.
Consequently, issues dealing with the household's decision to
participate in the FSP cannot be effectively addressed using the
IQCS. Furthermore, since the IQCS is not a longitudinal file it
is not possible to examine the dynamics of household participa­tion
in the FSP.
PSID. The PSID, like the CPS, is an annual survey of a nation­ally
representative sample. However, the PSID is a truly longi­tudinal
data base with a primary focus on providing information
on the income of families, particularly low-income families.
Begun in 1968 with a sample of 5,000 families, the PSID provides
annual information for families and individuals which includes:
o Employment status, occupation and industry, hours worked
.-· · o Earnings, other income, program pat;:_ticipation
o Assets
o Age, race, sex, marital status, ethnicity, education.
While the PSID is a longitudinal file covering a long time
period, the sample of households is relatively small compared to
the March CPS or IQCS.
SIPP. While the CPS, IQCS, and, to a lesser extent, the PSID
were the only data bases capable of supporting a large portion
of policy analyses, as the policy questions asked became more
detailed and sophisticated, major weaknesses in the use of these
data for policy analysis became apparent:
o The March CPS and the PSID measure economic data and house­hold
composition on an annual basis, whereas eligibility and
benefit calculations for most federal programs are based on a
monthly accounting period.
o Asset holdings and liabilities are not measured in the CPS
and are measured on an annual basis in the PSID.
o Complicated program rules and insufficiently detailed data in
the March CPS and the PSID makes the identification of house­holds
eligible for program assistance difficult.
o The IQCS contains information for program participant house­holds
only.
o The information on participation in other, non-food stamp,
programs is limited in the March CPS, the PSID, and the IQCS.
o It is known from comparison with program records that the CPS
data underestimate transfer income, retirement and disability
income, unemployment compensation, and property income.
The inability of the March CPS, the PSID, and the IQCS to pro­vide
the income and household composition data needed in
addressing the more complex policy questions led to increasing
appreciation of the need for more detailed and more frequent
information on assets, income flows, noncash transfer income,
household composition, and participation in government programs
for both program participant and nonparticipant families, house­holds,
and persons. Although the CPS could potentially have
been expanded to fill this need, rather than contemplating the
major changes that would have been necessary in the survey
instrument and procedures of the CPS--for which collecting
income information is in any case a secondary goal--the decision
was made to design a major new Survey of Income and Program
Participation.
3
4
The primary advantages of SIPP over previous data bases are:
o The monthly reference period allows need and eligibility to
be assessed on the same accounting period as is used in
program administration.
o The longitudinal data allows questions related to the dynam­ics
of income receipt and program participation to be
addressed.
o The richness of detail of the data allows a variety of
issues, such as participation in multiple assistance pro­grams,
to be examined.
o The potential matching of SIPP with administrative data would
allow a wider variety of administrative issues to be
addressed.
The promise of SIPP has already been demonstrated in a series of
research studies on the Food Stamp Program based on the test
survey for SIPP. The 1979 test panel, known as the Income
Survey Development Program (ISDP) Research Panel, is very simi­lar
in content and structure to SIPP. The results from the set
of food stamp studies based on the ISDP data, as presented in
the body of this report, provide important new information on
the economic status and behavior of FSP recipient households.~/
However, there are serious difficulties to be surmounted which
were indicated by the ISDP experience and are becoming increas­ingly
clear as SIPP starts to be used. Whereas before SIPP the
call was for more and better data, it is now becoming clear that
data collection efforts of this size and complexity present
analytical, data preparation and data management problems that
are orders of magnitude more difficult than any faced before.
Discussion has turned from problems of inadequate data to
problems of how best to use the complex data.
The experience in using the ISDP data on the FSP research
studies reported in this paper indicate ways that the problems
of data preparation and data management as well as the concept­ual
problems of longitudinal data can be handled. A key
~/In addition to the research reported here, the ISDP data
proved very useful for providing rapid information to FNS on
very specific policy issues. For example, the ISDP was used to
examine the adequacy of the earned income and child care deduc­tions
in the food stamp benefit formula. SIPP should be useful
in this context as well.
rationale for this monograph is the hope that by sharing these
ISDP experiences prospective SIPP research will benefit from the
wide professional critique.
C. OBJECTIVES OF THIS MONOGRAPH
There are two basic objectives of this monograph. The first is
to report the findings from a number of studies of FSP house­holds
all of which were based on the ISDP test panel. These
studies are important in that they represent the best current
information on questions such as how different asset limits
would impact FSP eligibility or how FSP program exit rates are
associated with factors such as finding a job. However, they
are preliminary as more definitive research can soon be con­ducted
based on the larger samples, longer time period, and more
tested procedures of SIPP as well as on the more refined ana­lytical
procedures that are emerging from the earlier efforts.
The second objective is to provide a basis for learning from the
ISDP experience. The research reported here can provide impor­tant
insights into the complexities which arise in the use of
longitudinal data files such as the ISDP and SIPP. Maximizing
the benefits of the ISDP-based work is contingent upon the
sharing of the approaches used, results obtained, and limita­tions
of this research with both the policymaking and research
communities.
D. ORGANIZATION OF THIS MONOGRAPH
This monograph is divided into two major sections. The first
section provides an overview of the SIPP and ISDP surveys
(Chapter II) and briefly summarizes the existing food stamp
research which uses the ISDP test panel--Chapter III presents
research on the economic status of the food stamp population,
Chapter IV summarizes studies on the dynamics of food stamp
participation, Chapters V summarizes research on the monthly
patterns of income receipt, and Chapter VI present studies
dealing with program participation and labor supply behavior of
food stamp households. The second section of the monograph
presents a discussion of the analytic and data issues which
arise in research using panel data (Chapter VII). The final
chapter summarizes the ISDP research and the promise of SIPP.
~ · '
6
II. THE SIPP AND ISDP SURVEYS
A. THE HISTORY OF SIPP
A longitudinal survey of the scope of SIPP had never been
designed or fielded on a nationally-representative basis. As a
result, a major development effort--called the Income Survey
Development Program (ISDP)--was authorized in 1975 by the Office
of the Secretary of the U.S. Department of Health and Human
Services (DHHS) to precede the fielding of SIPP. The ISDP
program sponsored extensive research into ways in which the
measurement, collection, and processing of income, transfer pro­gram,
and wealth data could be improved. It also undertook a
series of test panels to try out alternative data collection and
processing methods, the last of which (the 1979 ISDP Research
Panel) was sufficiently large to provide reliable national esti­mates
of many individual and household characteristics. The
intent was to fully exploit the experience of the 1979 ISDP
Research Panel in order to produce an optimal strategy for
fielding the first and later waves of SIPP. Subsequent events
prevented this intent from being fully realized.
The ISDP program was halted in 1982. Recognizing that the 1979
ISDP test panel was a valuable resource in itself, several
government agencies, including the U.S. Department of Agricul­ture,
Food and Nutrition Service (FNS), funded the work neces­sary
to release public use versions of the cross-section files.
In addition, the FNS funded the longitudinal linking of the data
across waves, a data access system, and the FSP research
discussed in this paper.
In the midst of the efforts to render the data usable for meth­odological
and public policy research, the Census Bureau
obtained the funding needed to conduct the full SIPP. Faced
with stringent deadlines for fielding the initial wave, the
Census Bureau relied heavily on the ISDP in developing question­naires,
data collection strategies, and processing systems. As
a result, SIPP is very similar to the 1979 ISDP test panel-­sharing
several of the characteristics that led to the complexi­ties
in the ISDP data processing five years ago. The ISDP
experience and associated research has thus acquired unique
importance as a way to learn not only about the promise but also
the potential pitfalls of using the SIPP data.
B. THE 1979 ISDP RESEARCH PANEL
The 1979 ISDP Research Panel consists of a nationally represen­tative
samp~e of approximately 7,500 households.~/ The sample
design oversampled both low and high income households in order
to improve the precision of measurement at both ends of the
income distribution. The individuals in the initial sample
households were followed for approximately one and one-half
years.
The survey consisted of six three-month rounds (or waves) of
interviewing using a technique called staggered interviewing.
That is, the sample of households was divided into three groups
of equal size (called rotation groups) and the survey was admin­istered
to the individuals in one group each month. The first
rotation group received the Wave 1 interview during February
1979 with subsequent waves occurring every three months there­after.
Figure 11.1 illustrates the outcome of this survey
technique. Note that the third rotation group, although sur­veyed
every three months, was not administered the Wave 4
instrument during the fourth round of interviewing. Instead,
they were administered the Wave 5 questionnaire with the Wave 6
survey following three months later. As a result, for one-third
of the sample there are five rather than six waves of data.
The survey instruments used in the 1979 ISDP Research Panel
included five core modules and a series of supplemental modules
which differed by wave. The five core modules were administered
during each of the first five waves of interviewing and covered
the following topics:
o Household composition and characteristics, and person charac­teristics
at the time of the interview
o Recipiency of income from assistance programs in each of the
three months prior to the interview
o Earned income and employment status for each of the three
months prior to the interview
l/This is actually a subset of all households in the original
design. The total sample initially included approximately 8,300
households from the area frame sample and 3,000 households from
samples drawn from program records. The 7,500 households are
those households from the area sample successfully interviewed
in early 1979 and subsequently reinterviewed throughout 1979 and
early 1980.
7
00
Reference
lob nth
1978 Nov
Dec
1979 Jen
Feb
Mar
"pr
May
Jun
Jul
"ug
Sep
Oct
Nov
Dec
1980 Jen
Feb
Mer
"pr
Mey
FIGlflE 11.1
SURVEY W"VES -- 1979 I SOP RESE ... RCH P"'£l
l---------------------------------------------1979----------------------~-~~-~~~-~~~~------------l l---------------------198o-----------------l
Feb Mllr "pr ""'~ Jun Jul "ug Sep Oct Nov Dec Jen Feb Mllr "pr Mil~ Jun
~
tJ = P11nel Rote"tlon Group 1
--> ,-----~ b • Penal Rote"tlon Q-oop 2
c • Panel Rotation Group 3
" b
" b c II
--- b c -------> "
c " b
--
" b c Ill
------5 core modules,---------- b c ------> " attitudes.
c " b
a b c I IV
----------------------------------~~~=:!::~:::~~--------------------------: ___ 1_______ : : ~------->1 c v
---------------------------------5e~~~~b~~e~;~~~~-------l__ b c , _____ ,C
5 core ooodu las, b
d lsebll I ty, personal
history (...,..rlage,
jobs, educ., migration)
----------------------------------------- ----------------------attitudes, reasons tor----------------------------
nor>-pert lclpetlon In
"FOe, Med lcald. Food
Stamps, SSI •
5 core modu las
non-lncCJIIe­producIng
assets, 11 11 fe­cyc
le" earnIngs,
past- secondary
educ., child
cere, school
breektest end
school I unch.
(2/3 sample)
c a
c a b
" b
b
5 core modules,
net worth, pension
cCN"erZ~ge.
VI
------> 1-c-----------
c a
c " b
" b
b
Annual lnc~e round­up,
cepltel gains
lind losses, ta>c:es,
I n-kl nd I ncoooe
(trlnge benetlts,
services, Incl. WIC,
Enar(jy "ss 1t).
o Unearned income for each of the three months prior to the
interview
o Characteristics of children under age 16 at the time of the
interview.
Each of the supplemental modules was administered once during
the survey, with Waves 2 through 5 containing at least one of
the supplemental sets of questions. Figure I I.1 also summarizes
the contents of each of the five waves. As implied above, the
reference period for most of the data collected was the three
calendar months preceding the interview month. Hence, as can be
seen from Figure II.1, the calendar period covered for each wave
varies by rotation group.
Wave 2 was particularly important for FSP research. W"i th
supplementary funding from FNS, in addition to the five core
modules, as noted, extra questions were asked on Wave 2 on work­related
expenses, shelter costs, and asset holdings which
allowed the identification of FSP eligibles as well as partici­pants.
This is the only source of nationally-representative
integrated data on (1) income, (2) household composition, (3)
work-related expenses relevant to allowable deductions against
earned income, (4) asset information relevant to the resources
test, and (5) shelter and other expenses allowable as deductions
in computing FSP benefits. Such information does not exist for
any other ISDP wave; current plans call for it to be collected
in the course of SIPP. However, the SIPP data will be more
difficult to use as it is scattered through different topical
modules to be administered in different waves.
The dispersion of the FSP eligibility information throughout the
different topical modules of SIPP is the result of the competing
needs of the various federal agencies and programs and the
academic community. Given the limited time available within
each topical module and across the set of modules, it is
necessary to choose among questions which are intended to aid in
program planning (e.g., questions concerning FSP eligibility)
and questions which address important social issues (e.g.,
questions concerning retirement decisions or health).
Although the 1979 ISDP permitted more comprehensive anrl exten­sive
analyses of the FSP than had previously been possible, 1979
was not a typical year for the FSP. In that year, the structure
of the FSP changed dramatically as the Food Stamp Act of 1977
was implemented. The provisions of that Act included a reduc­tion
of the net income eligibility standard, tighter restric­tions
on deductibles, an increase in the asset limit, and, most
importantly, the elimination of the food stamp purchase require­ment.
Following the elimination of the purchase requirement and
9
the implementation of the other provisions of the Act, partici­pation
in the FSP increased rapidly, rising by about 3.4 million
people over the following year. Given these changes, 1979
cannot be considered a representative year for the FSP.
Furthermore, the more recent changes in the FSP due to the
provisions of the Omnibus Reconciliation Act of 1981, the Food
Stamp and Commodity Distribution Amendments of 1981, and the
Food Stamp Act Amendments of 1980 and 1982, suggest that there
is a need for FSP analyses using the more recent data of SIPP.
C. THE STRUCTURE AND CONTENTS OF SIPP
The structure of SIPP, as noted, bears a close resemblance to
the structure of the 1979 ISDP test panel.2/ First, SIPP has a
similar instrument design--which combines a set of core modules
on levels of monthly economic well-being and changes in these
levels over time with a set of topical modules which vary by
wave. Some of these are fixed and assigned to particular waves;
others are variable and designed in response to particular
government agency program and policy analysis requirements.
Second, SIPP has a similar wave, rotation group, and reference
period structure, although spread of over a four-month rather
than a three-month period. Thus, each SIPP wave has four rota­tion
groups, which are interviewed (in rotation) every four
months. For each interview month the reference period is the
previous four months (that is, four months ago, three months
ago, two months ago, and last month).
The sample of households is larger and the period of time
covered is longer for SIPP than for the 1979 ISDP test panel.
Through 1984, about 20,000 households were interviewed under
SIPP, 5,000 each month. In 1985, a second panel of households
was introduced bringing the total sample size of SIPP up to
about 35,000 households. Each individual in the original sample
frame will be interviewed every four months for a period of two
and one-half years. Appendix Figure A shows the content and
reference periods of SIPP for 1984, 1985, and most of 1986.
2/This description draws heavily on Roger A. Herriot and Daniel
Kasprzyk, The Survey of Income and Program Participation. SIPP
Working Paper Series no. 8405. Washington, DC: U.S. Bureau of
the Census, 1984.
'. ~
III. ECONOMIC STATUS OF THE FOOD STAMP TARGET POPULATION
Included in the ISDP based research on the economic status of
food stamp research are studies 'Yhich address the asset holdings
of low-income and food stamp households (Bickel and MacDonald,
1981), the adequacy of benefits from food stamps in conjunction
with other income maintenance programs (MacDonald, 1983, 1984),
and the pattern and adequacy of multiple program benefits over
time (Doyle, 1985; MacDonald, 1985). In this chapter, the
studies dealing with each of these topics are summarized in turn.
A. ASSET HOLDINGS OF FOOD STAMP PARTICIPANT AND NONPARTICIPANT
HOUSEHOLDS
Eligibility for food stamps is restricted to households which,
in addition to meeting other requirements, have assets below a
statutory limit. Such rules are designed to limit participation
in the FSP to households without holdings of assets which can be
readily liquidated and are therefore potentially available for
the purchase of food. In 1980, Congress set the limit at $1,500
for most households; households of two or more, at least one of
whom is age 60 or older, are allowed up to $3,000 in assets.~/
Liquid assets, such as bank accounts, stocks, and bonds, are
counted toward the limit. In addition, a portion of the value
of some vehicles is counted. A homeowner's house and lot are
not counted~ Certain other nonliquid or employment-related
assets, such as personal effects and tools of a trade, are also
excluded.
Before the 1979 ISDP test panel there were no nationally repre­sentative
data on assets available in enough detail to assess
the dimensions of current asset holdings by low-income house­holds.
Wave 2 of the 1979 ISDP test panel provided the neces­sary
data for such an assessment. The report by Bickel and
MacDonald presents findings from this data base on the types and
value of assets held by FSP participants and several categories
of nonparticipants.l/ In addition, in order to assess the
sensitivity of food stamp eligibility to the resource test,
Bickel and MacDonald simulate the impact of altering the FSP
asset limits.
~/Although the $1,500 limit was increased briefly to $1,750
under the Food Stamp Act of 1977, the $1,500 and $3,000 asset
limits were first established in 1971.
2/This section summaries Gary Bickel and Maurice MacDonald,
Assets of Low Income Households: New Findings on Food Stamp
Participants and Nonparticipants. Washington, DC: Food and
Nutrition Service, U.S. Department of Agriculture, 1981.
11
Data and
Methodology
Findings
12
The Bickel and MacDonald work is of particular interest for two
reasons. First, Wave 2 of the 1979 ISDP test panel contains
more detailed information on assets than any contemplated wave
of SIPP. Second, in contrast to SIPP, the 1979 ISDP Wave 2 con­tains
the integrated assets and expense information necessary
for accurate determination of the pool of program-eligible
units.
Wave 2 of the 1979 ISDP test panel provided information on
assets of all household members, including savings accounts
checking accounts, cash on hand, certificates of deposit, stocks,
bond, cars, trucks, other vehicles, homes, insurance policies,
all types of income-producing properties (rental, commer~ial,
industrial, farm), undeveloped land, and other assets such as
trusts, estates, and mortgages. Certain types of assets were not
included in the data collected. However, for most households,
pension and retirement funds were the only potentially signifi­cant
omission. Additionally, sufficient other information on
households' incomes and characteristics was collected in order to
distinguish between households eligible for food stamps, whether
or not they actually participated, and households not eligible.
The sample used for this study included about 7,200 households.
The analysis focused primarily on the actual food stamp eligi­bility
unit or "food stamp household" within each sample house­hold.
All households were classified first according to the FSP
income eligibility test and then the resource test. They were
further classified into participants and nonparticipants accord­ing
to whether they had reported receiving food stamps in any of
the previous three months. (Three months was used to provide a
broader measure of participants, given the relatively rapid
entry and exit rates for the food stamp caseload.) Food stamp
participants and three nonparticipant groups were defined to
permit comparisons of asset holdings. The FSP nonparticipant
groups were:
1. FSP eligible nonparticipant households
2. Low-income households which were ineligible for food stamps
on the basis of their assets
3. Households which were ineligible for food stamps on all other
grounds.
The limits on assets have a major impact on FSP eligibility.
Over twelve million persons who otherwise would have been eligi­ble
for food stamps had assets high enough to exclude them from
eligibility. Based on this finding, Bickel and MacDonald esti­mated
the savings in potential benefits to be $2.-9 billion in
1981 (19R1 dollars). Several other general patterns in the
asset holdings of FSP participant households and others are
noteworthy:
o Nearly one-half (49 percent) of FSP participant households
had no countable assets at all, while 91 percent had count­able
assets of $500 or less.
o FSP participant households had far fewer assets than house­holds
not eligible for the program. When all assets except
homes were considered, 37 percent of participant households
had no assets, and 90 percent had less than $1,500. By com­parison,
3 percent of FSP ineligible households had no
assets, and only 21 percent had less than $1,500.
o FSP participants tended to have few liquid assets. Fifty-one
percent of the participant households had no liquid assets,
93 percent had $500 or less. There were no participant
households in the sample with stocks or bonds.
o FSP participant households had few assets in any other speci­fic
asset categories. Approximately one-half (51 percent) had
no car, only 36 percent owned homes, 9 percent had life insur­ance
policies, and 2 percent had rental property. No FSP
participant in the sample reported any farm or business
interests, undeveloped land, mortgages, royalties, estates, or
trusts. Ry contrast, 87 percent of FSP households ineligible
on the basis of either assets or income owned a car, 70 per­cent
owned their homes, and 43 percent owned life insurance.
o Among households eligible for food stamps, those who actually
participated tended to have slightly fewer assets than those
who did not. Thirty-seven percent of FSP participants, com­pared
to 30 percent of FSP eligible nonparticipants, had no
assets (excepting homes).
o Households disqualified from food stamps solely on the basis
of their assets were a relatively well-off group in terms of
the types and value of assets they owned. Two-thirds (68
percent) of these households had total assets (not including
homes) in excess of $5,000.
Since the data for this report were collected in the Spring of
1979, both the income and asset limits in the FSP have changed.
Thus, the figures in this report may not represent the current
holdings of food stamps household. More recent data from SIPP
is needed in order to obtain up-to-date information on the
impact of the asset limit on FSP eligibility.
13
Data and
Methodology
14
B. THE PATTERN AND ADEQUACY OF MULTIPLE PROGRAM BENEFITS
The debate about whether and/or how to limit federal expendi­tures
for income transfer programs has again focused attention
on questions about the adequacy and equity of benefits available
from the mix of social insurance, cash welfare, and in-kind pro­grams
that help maintain income security. With this debate
comes disagreement about tradeoffs hetween the extent of income
security provided and its costs. It has been argued that the
gradual expansion and extension of income transfer programs has
made multiple benefits available that provide more than is
necessary for adequate support, and that it has reduced the
incentive to work. Opponents reply that without multiple
benefits there would be gaps in program coverage, and that the
current system does not adequately provide for all.3/ Once
again, this issue could not he properly examined before the 1979
ISDP test panel became available s:i:nce the ISDP provided, for
the first time, concurrent information on monthly participation
in a variety of income transfer programs, along with income
information for the same period.
The work by MacDonald on multiple program participation and
the adequacy of benefits approached the issue by examining
the relationship between income and poverty status4/ before
transfers and the relationship including transfer income for
recipients of all major income support programs. The paper
includes comprehensive descriptions of the incidence of multiple
]/This section summarizes Maurice MacDonald, Multiple Benefits
and Income Adequacy for Food Stamp Participant and Nonpartici­pant
Households. Washington, DC: Mathematic Policy Research,
February 1983. Prepared for the U.S. Department of Agriculture,
Food and Nutrition Service. Summary results fro~ an extension
of the analysis to include the impacts of nutrition and housing
benefits are also included. See Maurice MacDonald, Multiple
Benefits and Income Adequacy: Impacts of Nutrition and Housing
Benefits. Madison, WI: Institute for Research on Poverty,
August 1984.
~/The official Office of Management and Budget (OMB) 1979 annual
poverty line was used as the household con ~nmption need standard
in evaluating the adequacy of benefits. Three month incomes
below one-quarter of that level were classified as inadequate to
meet the households needs. (For more information on the offi­cial
poverty threshold and for poverty statistics see U.S.
Department of Commerce, Bureau of the Census, Current Population
Reports, Series P-60.)
benefit recipiency, the effects of benefits on poverty status,
and the characteristics of recipient and nonrecipient households
for different programs. It then focuses on the effectiveness of
the FSP in alleviating poverty within the context of multiple
benefits.
The research reported here used Wave 2 of the 1979 ISDP test
panel to examine the actual reported receipt of multiple
benefits. It analyzes the incidence and effects of receiving
benefits from one or more of the six most important cash and in­kind
transfer programs: Food Stamps (FSP); Public Assistance
(PA) including Aid to Families with Dependent Children and other
welfare programs; Unemployment Insurance (UI); Old Age, Survi­vors,
and Disability Insurance (OASDI); Supplemental Security
Income (SSI); and Medicaid. The combined effect of a somewhat
larger list of transfer programs on the adequacy of benefits as
measured by national poverty guidelines is also examined. In
estimating the effects of transfers on benefit adequacy, trans­fers
were added sequentially to market (pretransfer) income in
the same order that these programs count income from other pro­grams
in determining benefit entitlements: social insurance
(OASDI and UI) first, then cash welfare (PA and SSI), followed
by food stamps (FSP).2_/ (Medicaid was omitted from the income
count since it is seen as meeting special rather than normal
income requirements.) The sample used for this study included
about 7,200 households.
Figure 11I.1 displays categories of households, to explain how
the analysis of multiple benefit recipiency was organized. As
can be seen, the primary focus is on households that were eligi­ble
for food stamps in Spring 1979. Sufficient information on
income types, assets, and relevant expenditures was collected by
ISDP to classify all households into food stamp eligible or
ineligible groups •
.2/There is a substantial literature on the evaluation of in-kind
benefits (e.g., Smeeding, 1982, 1984; Manser, 1981) which pro­poses
several different methods: market value, recipient or
cash equivalent value, government cost, and poverty budget
share. Government cost, since it includes administrative costs,
would be likely to yield the highest valuation, while the
poverty budget share would yield the lowest since it places a
limit on the value of in-kind benefits. The approach used by
MacDonald to value food stamp benefits was market value.
1'5
16
FIGURE II I. 1
CATEGORIES OF HOUSEHOLDS (IN MILLIONS) FOR MULTIPLE
BENEFITS ANALYSIS, SPRING 1979
All Households
~~----------------- (80.6) ------------------
Food Stamp-Eligible
(12.4)
Food Stamp Ineligible
(68.2)
Food Stamp
Participants
Food Stamp
Nonparticipants Poor
(3.8)
Not
Poor
(4.8) (64.4)
Poor
( 3.3)
SOURCE:
I Not
Poor
(1.5)
(7 .6)
Poor
(5.5)
I Not
Poor
(2.1)
MacDonald, M. Multiple Benefits and Income Adequacy for Food
Stamp Participant and Nonparticipant Households. Washington,
D.C.: Mathematica Policy Research, February 1983.
Findings In Spring 1979, there were 28 million households who reported
receiving benefits from one or more of the six major assistance
programs studied. Less than one-quarter of these had benefits
from two or more major programs. The other three-fourths
received benefits from only one program. A closer look shows
that about two-thirds of all households reporting benefits from
any of the major programs received only OASDI. The principal
findings of the analysis of the receipt of multiple benefits were:
o Social insurance recipients (recipients of OASDI and UI)
frequently do not have multiple benefits and are usually
ineligible for welfare. Only 17 percent of OASDI recipient
households and 34 percent of UI recipient households received
benefits from other programs.
o In contrast, multiple ben_efits were widespread among food
stamp, Medicaid, and cash welfare recipients. In each of
these programs, over 80 percent of recipients obtained
benefits from at least one other program. About two-thirds
of food stamp participant households had three or more of the
six major benefits (most frequently, food stamps, Public
Assistance, and Medicaid).
o Many households below the poverty line received few or no
benefits. Of pretransfer poor households who remained poor
when all transfer income was counted, 38 percent did not
receive any of the six major benefits, 32 percent received
only one henefit, and 27 percent received food stamps only.
Based on the analysis of the adequacy of the program benefits it
was found that receipt of multiple program benefits did not lead
to high income. The observed effects of multiple benefits on
benefit adequacy include the following:
o Of all pretransfer poor households, over one-half remained
poor, 40 percent were removed from poverty by OASDI and/or
UI, cash welfare and food stamps together removed another 5
percent.
o Food stamps alone reduced poverty by 1 percent. If all
eligible households had participated in the FSP, pretransfer
poverty would have been reduced by 2 percent.
o Among the pretransfer poor households who received food
stamps, most (80 percent) remained poor after all transfers
were counted. Of the 14 percent of food stamp households
with money incomes below one-half of the poverty line, less
than one-third still had incomes below that level after food
stamp benefits were counted.
, .,
18
Perhaps a more informative way of examining multiple benefit
effects is to look at actual dollars. The dollar difference
between each household's quarterly income and the quarterly
equivalent of the poverty threshold for that household when added
together for all poor households is defined as the poverty income
gap. In general, all three major types of transfers (i.e.,
social insurance, cash welfare, and food stamps) had greater
percentage effects in reducing the poverty gap than they did in
reducing poverty counts. This supports the finding that most of
the effect of transfers was to help those with incomes below one­half
of poverty. Among food stamp recipients, social insurance
appeared less effective than did cash welfare in reducing the
poverty income gap. In particular, it was found that:
o Among all households nationwide, social insurance closed over
50 percent of the Spring 1979 $20 billion poverty income gap,
cash welfare reduced it by 11 percent, and food stamps reduced
it by another 4 percent. After all benefits had been consid­ered,
one-third of the original gap between pretransfer
income and the poverty line remained.
o Among FSP participant households, social insurance reduced
the Spring 1979 gap between the pretransfer incomes of FSP
participants in poverty and the poverty line by 23 percent,
cash welfare reduced it about one-third, and food stamps
closed about one-fifth. After all benefits had been consid­ered,
about one-quarter of the gap between incomes and the
poverty line remained.
o In contrast, for FSP eligible households who did not partici­pate,
over one-half the poverty income gap remained after
cash benefits were added.
Figure III.2 summarizes the results of the multiple benefit
analysis by showing the Spring 1979 distribution of FSP eligible
households relative to the official poverty line as they
appeared (1) before government transfers, (2) after major cash
transfers, and ( 3) after major cash transfers and food stamp
transfers. Before government benefits were considered, 80 per­cent
of FSP participants fell below national income poverty
guidelines. This included 64 percent below one-half of the
poverty line and an additional 16 percent between 50 and 100
percent of the poverty line. After all major transfer programs
were considered, 64 percent of FSP participant still remained
below income poverty guidelines, including 4 percent of FSP
participants who remained below one-half of poverty. It is
important to note once again that the FSP has changed considera­bly
since Spring 1979. Cons~q.uently, more recent data from SIPP
is needed to reflect the current adequacy of program benefits.
Percent of 30
Households
FIGURE III.2
EFFECT OF MULTIPLE BENEFITS ON INCOME
AS A PERCENT OF THE POVERTY LINE, 1979
F'ood Stomp Porticlpant.s
~._----~r-----------T-----------~------
Pretransfer
Income
Percent of 3D
Households
With Welfare
and Social
Insurance
With Welfare,
Social Insurance,
a!'ld Food Stamps
F'ood Stamp EJI;ible Nonpartidpants
~----------,-----------------T----------
Pretransfer
Income
With Welfare and
Social Insurance
(but ~ Food Stamps)
Household Income
as a Percent of
the Poverty Line
~over 130%
~ 100-129%
§§ 50-99%
~Under 49%
19
20
A later supplementary analysis of multiple benefit receipt used
Wave 4 of the 1979 ISDP test panel to include the School Lunch .
Program and housing subsidies and Wave 6 to include the Special
Supplemental Food Program for Women, Infants, and Children (WIC)
(MacDonald, 1984). While this analysis is not strictly compar­able
to the main analysis primarily because using Waves 4 and 6
necessitated focusing on pretransfer poor households rather than
FSP eligible household, this difference is not a major limita­tion
on the analysis since the pretransfer poor define closely
the subset of households who are eligible for most of the
benefits of interest. The principal findings of this analysis
were:
o About 77 percent of both FSP and school lunch recipients
reported receiving benefits from another program--compared
with 88 percent for cash welfare.
o When only cash benefits are counted, 11.2 percent of house­holds
were poor in late 1979 (the time of Wave 4). Adding
the market value of food stamps, school lunches, and housing
subsidies reduced the percent poor by 1.4 percentage
points._§/
o The WIC data from Wave 6 indicate that approximately 1 per­cent
of all households and 3 percent of all pretransfer poor
households reported receiving WIC. Of the pretransfer poor
WIC recipients, 38 percent reported receiving food stamps in
Wave 4 and 62 percent reported both food stamps and school
lunches. There were no households with school lunch only in
Wave 4 who reported receiving WIC in Wave 6.
C. MULTIPLE PROGRAM BENEFITS DURING THE COURSE OF A YEAR
The studies presented in the previous section considered the
receipt of benefits from multiple assistance programs at any
point in in the interview wave. By using the five waves of the
ISDP test panel, the patterns of transitions between multiple
benefit categories over the year (Doyle, 1985) and the receipt
~/In estimating the value of benefits from food stamps, school
lunch, and housing benefits, MacDonald ue ed the ·market value
approach.
Data and
Methodology
Findings
of multiple benefits for the 12 months of calendar year 1979
(MacDonald, 1985) could be considered.?/
Both the study by Doyle and the study by MacDonald used a linked
longitudinal file created from the five waves of the 1979 ISDP
test panel. This longitudinal file was created for the analysis
of the dynamics of FSP participation and is discussed in the
context of that work in the next chapter. By using the linked
longitudinal file, the patterns of the receipt of benefits by
households from multiple assistance programs over the full 12
months of 1979 could be examined. The five assistance programs
considered in the studies were: Old Age, Survivors, and Disa­bility
Insurance (OASDI), Unemployment Insurance (UI); Supple­mental
Security Income (SSI); Aid to Families with Dependent
Children (AFDC); and Food Stamps (FSP). Eleven program partici­pation
categories were defined. When only one of the five ma.ior
programs was reported by the household for a month the benefit
type was simply that benefit. When more than one benefit was
reported, the household was classified by whether or not it
received food stamps as well as by the largest benefit amount
from the other cash programs. The residual group for each month
consisted of households without benefits from any of the five
programs analyzed plus recipients of one very infrequent benefit
combination of two major benefit programs (AFDC and UI). Doyle
combined several multiple assistance categories because of small
sample sizes. On average, there were 3,174 households per month
in the sample for the Doyle study and 3,205 for the MacDonald
study.
The study by Doyle examined the extent to which households
switched between nine multiple benefit categories and the nature
of those transitions. The study found that one-third of the
sample of households reported some change in the multiple pro­gram
category in which they participated during 1979 and one­fifth
reported three or more transitions during the year. Other
findings of interest include:
o Households receiving OASDI only were the most stable group,
with only 18 percent reporting transitions over the year. UI
L/This section summarizes MacDonald, Maurice Serial Multiple
Benefits and Monthly Income Adequacy. Washington, D.C.:
Mathematica Policy Research, March 1985. Prepared for the U.S.
Department of Agriculture, Food and Nutrition Service and a
memorandum from Pat Doyle of Mathematica Policy Research the
U.S. Department of Agriculture, Food and Nutrition Service.
21
22
recipients were the least stable, with all recipient house­holds
reporting at least one transition.
o Of those households receiving food stamps, the most stable
households were those also receiving OASDI, with almost
three-fourths reporting no transitions over the year. House­holds
receiving food stamps only or food stamps and SSI were
the least stable. Over three-fourths of both groups of
households reported at least one transition. The final food
stamp group, households receiving food stamps and AFDC, was
somewhat more stable, with 40 percent of all households
reporting no transition.
o The most frequent transitions for households receiving food
stamps only or food stamps in conjunction with some other
program were to multiple program categories which included
food stamps. For example, over 70 percent of the households
receiving food stamps only which 'experienced a transition
added participation in OASDI, SSI, or AFDC to their food
stamp benefits.
o Of those households not participating in any assistance
program in January, over one-fourth had begun participating
in at least one program by December. For 5 percent of the
households, the program they entered was the FSP.
o The number of months between transitions is short ( t to 3
months) for households with two or more transitions and
approximately 90 percent of such households return to their
original multiple benefit category.
o For those households observed to have only one transition
approximately 50 percent had no benefits in January but began
receiving benefits during the course of the year, 25 percent
were participating in one program for the full year and supple­mented
that program at some time during the yeEr, and 20 per­cent
simply discontinued benefits at some point in the year.
MacDonald examined average monthly participation rates and
average length of participation for eleven multiple benefit
categories and the effects of the different benefit combinations
on the adequacy of the benefits. The principal findings of the
MacDonald study were as follow:
o Among those who received any benefits from the five transfer
programs for the whole of 1979, those with only OASDI or only
Ul were by far the most frequent beneficiaries. Households
receiving only food stamps were third in frequency at 7 per­cent
of all 1979 recipients. About 30 percent of those who
received benefits from any program received them from two or
more programs at some time during 1979, most of whom had
benefits from only two programs.
o The adequacy of different monthly benefit combinations was
evaluated by comparing incomes with and without the cash
benefits and the face value of any food stamps they received
to a monthly poverty line determined by the net income limit
for food stamp eligibility in July 1979.~/ By that standard,
sample households would have been in poverty for 35 percent
of the months if they had not received assistance. The bene­fits
they actually received were sufficient to reduce the
percentage of 1979 months spent in poverty to 25 percent.
o Whatever their income without the monthly benefits, receiving
any single one of the cash benefits was always more advan­tageous
for the household than receiving food stamps alone.
Yet monthly food stamp benefits were sufficient to move about
30 percent of those recipients who would have been below one­half
of the monthly poverty line above that standard.
~/The monthly net income limit for the FSP is less than the
official annual poverty line divided by twelve.
Data and
Methodology
24
; ' '
IV. THE DYNAMICS OF FOOD STAMP RECIPIENCY
The analysis of program turnover is crucial, among other reasons,
in order to shed light on the major issues of long-term depen­dence
on public transfers--how long do households typically
remain recipients? What are the turnover patterns of different
types of households? What factors affect turnover? The ISDP
1979 test panel provided the first nationally representative
data with which monthly program caseload turnover rates could be
analyzed. Such a task required monthly income and related
information necessary to determine eligibility, detailed house­hold
characteristics, and monthly observation of program parti­cipation
status. There are two studies which make full use of
the longitudinal nature of the ISDP in looking at turnover in
the FSP. The first study (Carr, Doyle, and Lubitz, 1984)
generated overall estimates of turnover rates in food stamp
participation and compared them with estimates generated from
earlier, less representative data. In addition, separate
estimates of turnover for important subgroups within the low­income
population were calculated and changes in eligibility
status were estimated over time.
The wide variation found by Carr et al. in food stamp turnover
rates by type of household makes it important to identify what
kinds of events cause households to enter and leave the food
stamp caseload. The second turnover study (Lubitz and Carr,
1985) pursued this question by estimating the impact of particu­lar
events on the probabilities of entrance to and exit from the
FSP. The ISDP data made such an analysis possible because it
provided the month-to-month linked information needed to identi­fy
changes in household circumstances and to associate those
changes with program entry and exit.
The data base from which estimates of turnover in the FSP were
derived was a linked longitudinal household file develoyed
from the first five waves of the 1979 ISDP test panel~ Socio­demographic
variables such as household composition, ethnicity,
and education were included as well as indicators of food stamp
receipt and all components of the eligibility determination
process.
For the purpose of the turnover studies, longitudinal household
units were constructed according to the status of the principal
person(s) in the unit and complete income data from all five
~/This section is primarily a summary of Timothy J. Carr, Pat
Doyle, and Irene Smith Lubitz, Turnover in Food Stamp Participa­tion:
A Preliminary Analysis. Washington, DC: Mathematica
Policy Research, July 1984. Prepared for the u.s. Department of
Agriculture, Food and Nutrition Service.
ISDP waves were used. Principal persons are generally the
"reference person" in the terminology of the survey, and his or
her spouse, if any. (They may be thought of as the heads of the
household.) As a result of this approach, the composition and
characteristics of units were allowed to change over time. For
example, it is possible to observe an ongoing unit which with
the passage of time gains or loses a household head or other
member. For the purposes of the present analyses, the universe
of households consisted of all units headed by a primary sample
member. A primary sample member is an individual included in
the initial sampling frame, and therefore ·followed throughout
the survey to the extent possible. A household could be formed
during any month and dissolved during any month. The only
sample households excluded from the studies were units formed
after the initial interview which were headed by individuals who
were not present in Wave 1~ About 7,000 sample household units
were retained in the analysis.
The analysis in the study by Carr et al. was carried out in two
phases~ First, a descriptive analysis provided an overview of
the general level of turnover in food stamp eligibility and
participation during 1979, the manner in which turnover varied
over the course of the year, and the manner in which turnover
varied across socioeconomic groups.
Several indicators of turnover levels in program eligibility and
participation were used. The most important of these were the
entry rate and exit rate. For program participation, these are
defined as the proportion of all households who did not receive
food stamps in one month who were receiving food stamps in the
next month and, similarly, the proportion of all households who
did receive food stamps in one month who were not receiving them
in the next month. Other measures of participation turnover used
were the proportion of households that continuously received
food stamps, the number of spells of food stamp participation
during the sample period, and the average duration of food stamp
participation. Analogous turnover measures were defined for
program eligibility.
Since such descriptive analysis cannot identify the independent
effects of individual factors, the second phase of the analysis
estimated a multivariate statistical model of program participa­tion
and eligibility. The probabilities of entering and exiting
from the FSP (or to and from eligibility for the program) were
estimated (using event history analysisl/) as functions of house­hold
characteristics expecterl to affect eligibility and participa­tion.
2/see Tuma (1982) for a discussion of event history analysis.
25
Findings
; • .
26
There was substantial movement of households into and out of the
FSP; the number of households who received benefits from the
program over the course of a year was over 70 percent greater than
the number who received benefits in any given month. Furthermore,
there were significant variations in observed turnover across
socioeconomic groups. Specific findings of interest include the
following:
o Of all households who received food stamps in a given month,
7.3 percent left the program within the next month.
o Given that a household did not receive food stamps in a given
month, there was an 0.53 percent probability that it would
enter the program in the next month.
o Of the households who were present in the sample for the full
calendar year and reported receiving food stamps at any time,
about one-third received food stamps for the entire year.
o The probability that a household was a food stamp recipient
household at least once in the course of the year was nearly
twice (1.74) the probability that it participated in the
program in a given month.
o There were systematic variations in entry and exit rates
across households. The lowest monthly exit probabilities
were for households who received AFDC and/or other types of
welfare, nonwhite households, households containing an
elderly or disabled person, households in which no person was
employed, households whose head has relatively little formal
education, and households headed by a single person.
o The highest probabilities of entrance into the program were
for households who received AFDC, households headed by a
single person with children, nonwhite households, large
households, households in which no person was currently
employed, households whose head had little formal education,
and households in which an elderly or disabled person was
present.
The multivariate results tend to support the findings of the
descriptive analysis. In particular, after controlling for
other factors, entry rates were higher and exit rates lower for
households with a nonwhite household head, no earner present, a
single household head, elderly or disabled membe-rs, and AFDC
recipients.
The principal findings of the descriptive analysis of program
eligibility are as follows:
The Role of
Changes in
Household
Circumstances
'.~
o There appeared to be substantial turnover in food stamp eligi­bility.
The probability that an eligible household became
ineligible each month was about 17 percent, and the probability
that a previously ineligible household became eligible was 6.3
percent. Both these probabilities are substantially higher
than the corresponding probabilities of participation change.
o The types of households with the highest propensity to become
eligible for food stamps were those who received AFDC and
other types of welfare, households headed by a single person
with children, nonwhite households, households whose head had
relatively little formal education, households in which no
person was working, and households containing elderly or
disabled persons.
o The types of households with the lowest propensity to become
ineligible were those who received AFDC and other types of
welfare, those with a head over the age of 65, those with a
single head, those with a single member, those in which no
one was employed, and those containing a disabled person.
Most of the relationships between characteristics and eligibil­ity
transitions observed in the descriptive analysis are main­tained
when other factors are held constant. In particular:
o Households with elderly or disabled members, those on AFDC,
and those who were nonwhite were all more likely to become
eligible for the Food Stamp Program than otherwise similar
households.
o Single headed households with children were more likely to
become eligible than were other households.
o Households with elderly or disabled members, nonwhite house­holds,
single headed households, nonearners, and AFDC recipi­ents
were all more likely to remain eligible for food stamps
than were other types of household.
The subsequent study by Lubitz and Carr extended the earlier
research on turnover by examining the role of changes in house
hold circumstances on the likelihood that a household would
enter or leave the FSP.2/ Whereas the initial study identified
2/This section summarizes Irene Smith Luhitz and Timothy J. Carr's
Turnover in the Food Stamp Program in 1979: The Role of Trigger
Events, February 1985. Washington, DC: Mathematica Policy
Research. Prepared for the U.S. Department of Agriculture, Food and
Nutrition Service.
27
in Food Stamp
Turnover
28
~·.
characteristics of households that are correlated with higher or
lower probabilities of transition in and out of the FSP, the
subsequent study identified particular events that evidently pre­cipitate
changes in program status. For example, the findings of
the Carr et al. study include a higher than average program entry
rate for households with no earner present. The trigger events
analysis estimated the probability of program entry in the months
immediately following the loss of earnings.
Five potential types of events were defined as trigger events
(i.e., events reasonably likely to "cause" or precipitate a
change):
o Large changes in monthly pretransfer income between one month
and the next.~/ Those cases in which the income change
resulted in a change in eligibility status were also differen­tiated
from those in which it did not.
o A change in the number of employed household members from one
month to the next. Multiple-earner were also differentiated
from single-earner households.
o A change in asset holdings, specifically a decline in assets as
a possible trigger of program entrance.
o Changes in receipt of Unemployment Insurance, either exhaustion
of UI benefits (as an entry trigger) or beginning to receive
benefits (as an exit trigger).
o Household composition change, defined as a change from having
one head to two heads, or vice versa.
The methodology employed had two parts. First, a descriptive
investigation of the relation between trigger events and transi­tions
was undertaken to track households in the ISDP sample
through the course of calendar year 1979 on a month-to-month
basis. When a comparison of a household's circumstances in
successive months indicated that a trigger event had occurred, the
household was further tracked to determine whether a transition
(entrance or exit) occurred. The probability that a household
experienced a transition after a trigger event, and the
~/The effect of changes in total income on transitions into and
out of the program was analyzed; however the analysis was not
satisfactory because these changes confounded exogenous changes in
the household's economic status (such as the loss of a job) with
changes in transfer income brought on by that event.
elapsed time between the two events, was then tabulated and
analyzed.
Second, a multivariate analysis of the effect of trigger events on
entry and exit rates was used to isolate the independent efforts
of different trigger events. This analysis (based on event
history analysis) estimated transition probabilities as functions
of explanatory variables in a manner similar to more familiar
regression models. The emphasis was on isolating the separate
effects of the different trigger ev~nts on transition rates.
It is important to note that for many of the trigger events being
considered the number of cases available for analysis is quite
small. With unweighted sample sizes of less than 10 or 20 for
households entering or exiting from the FSP following a trigger
event, the analysis cannot support definitive conclusions about
the impact of changes in household circumstances on program
participation.
The principal findings of the Lubitz and Carr study were as
follow:
o Trigger events were strongly correlated with the probability
that a household experienced a transition (entry or exit). A
household that experienced a trigger event was far more likely
to experience a transition within six months than a household
selected at random.
o Most instances of entering and exiting from the program in
response to trigger events occurred in the same month as the
trigger event or shortly thereafter.
o The event most likely to precipitate entry into the program was
a decrease in the number of earners present in the household.
Declines in pretransfer income resulted in households' becoming
eligible to participate in the program. Household splitting,
and exhaustion of UI benefits were also significant trigger
events.
o The events most likely to precipitate exit from the program
were an increase in pretransfer income and an increase in the
number of earners present in a household. Beginning to receive
UI and becoming a couple (i.e., moving from one-head to two­head
status) were also significant trigger events.
o Changes in pretransfer income and in the number of earners were
experienced by a large proportion of all households in the
course of the year. To this extent, labor market phenomena are
more important in explaining turnover than less frequent demo­graphic
phenomena such as changes in household composition.
29
30
~ · .
V. MONTHLY PATTERNS OF INCOME RECEIPT
The FSP is a monthly program. Eligibility is based on income for
a monthly accounting period and benefits are provided monthly.
Therefore, survey data with monthly observations provide much
more accurate information for describing FSP participating and
nonparticipating households and for examining analytical issues
concerning FSP design and operations. l.Ji th the monthly observa­tions
from SIPP, the household's income, receipt of other trans­fers,
and household composition can be examined for the particu­lar
months during which the household reported receipt of FSP
benefits. In contrast, the traditional data sources for FSP
analyses such as the CPS and the PSID collect data about the past
year. Since many low income households experience large income
fluctuations from part year employment and earners leaving or
entering the household unit, analyses of issues such as the
incomes of FSP participants during their period of participation
that are based on the CPS and PSID must rely on strong assump­tions
and are therefore imprecise.
This study examined monthly patterns of income receipt and
focused on the degree to which the assumptions about intrayear
income flows used by analysts with CPS data were valid. One
application, in which the assumptions concerning intrayear
patterns of income are particularly important, is in the analy­sis
of the effects of proposed program changes on program costs
and the distribution of benefits. FNS and other agencies make
extensive use of microsimulation models based largely on CPS
data for the analysis of potential program changes.
Ideally, the microsimulation model would use monthly data in
estimating the impact.of program changes. However, prior to
SIPP such data were not available and the data base most com­monly
used in microsimulation was and is the annual March CPS.
Since the March CPS does not have information on intra-year
income flows and household composition, assumptions about such
intra-year patterns need to be made and built into the microsim­ulation
models. The availability of the 1979 ISDP test panel
provided the opportunity to test the assumptions underlying the
microsimulation estimates which were obtained from the food
stamp model used by FNS.
The FNS food stamp model--Micro Analysis of Transfers to House­holds
(MATH)--is a CPS-based microsimulation model. As it was
originally developed, the model created variables which repre­sent
income received in a typical month by r~a ch individual
surveyed using the following assumptions:
o Annual earnings are assumed to be evenly distributed over the
reported number of months worked.
Data and
Methodology
o Annual unemployment compensation is assumed to have been
received only during the periods of months looking for work
or working part time.
o Simulated annual public assistance is allocated according to
periods of work and nonwork, but assumed to be a uniform
amount per month within those two categories.
o The types of income received during a simulation month are
assumed predictable by current employment status.
o Any unearned income in addition to public assistance and
unemployment compensation (e.g., social security, alimony) is
assumed to have been received evenly throughout the year.
All these assumptions are obviously open to question. The
descriptive analysis of patterns of monthly income receipt
conducted by Doyle (1984) using the ISDP panel data sheds light
on the appropriateness of these assumptions.J!
Because the intent of the research summarized here was to improve
the assumptions built into the microsimulation model operating on
the CPS data bases, certain sources of variability, such as the
number and type of jobs held during the year and changes in
household composition, were not pursued. Attention thus focused
on two sources of variation that can be incorporated into a CPS­based
model:
o The extent to which husbands and wives tended to work during
the same or different periods over a year.
o The extent to which types and amounts of unearned income varied
over a year, in particular according to work/nonwork status.
The data files were constructed from the set of individuals
interviewed in Wave 5 with monthly retrospective data for
calendar year 1979. Because Wave 5 interviews were conducted in
the Spring of 1980, these files closely resembled the March CPS on
which the food stamp simulation data bases are built. The labor
force participation analysis focused on husband-wife families.
The income patterns analysis focused on adults in poor or near­poor
households •
.l/This chapter summaries Pat Doyle, An Analysis of Intra-Year
Income Receipt. Washington, D.C.: Mathematica Policy Research,
July 1984. Prepared for the u.s. Department of Agriculture,
Food and Nutrition Service.
31
Findings
32
~ ·.
Due to the lack of longitudinal editing and imputation for nonre­sponse
on income questions (discussed in Chapter. VII)--a poten­tial
source of bias in studies of income receipt over time--the
study was restricted to households for which all income amounts
were completely reported in each wave they were interviewed. The
husband-wife data base included 3,283 families with complete
data. The poor and near-poor data base included 9,383 individ­uals,
7,468 of whom were present in the ISDP sample for all 12
months of calendar year 1979. Individuals not present for a
period were treated as receving no income for that period.
In the construction of transfer program simulation models that
operate on the March CPS, it has been assumed that husbands and
wives who both reported working for part of the year tended to
work during different parts of the year. This follows the
theory (called the added worker effect) that when household
heads are unemployed, secondary workers such as previously
nonworking spouses enter the .iob market in order to maintain
customary household income levels.
Analysis of the ISDP data provides clear evidence that the added
worker effect does not explain the labor force pattern of most
husband-wife families. About 40 percent of couples had both
spouses working; about 35 percent had the male working while the
spouse did not; about 7 percent had the female working while the
spouse did not. About 18 percent had neither spouse working.
This should not be unexpected given that people are documented
to marry persons similar to themselves along a wide range of
personal characteristics: ethnic and religious backgrounds,
age, level of formal schooling completed, and type of occupa­tion.
All these characteristics strongly affect the degree of
an individual's attachment to the labor force and lead to a
tendency for men with strong labor force attachments to marry
women who also work for large portions of the year. In such
cases there is necessarily substantial overlap in the periods
they work.
More detailed findings on labor force attachment of husband-wife
families include the following:
o The majority of elderly families (head over 65) had no labor
force activity. In January, for example, 64 percent did not
work; in December, the proportion had increased to 71 percent.
o For white families 35 to 40 percent had both spouses working;
30 to 35 percent had only the sample reference person working;
7 to 9 percent had only the spouse working; about 20 percent
had neither working.
.....
o For nonwhite households there was more monthly fluctuation
although no obvious trend over the year. In March, for
example, 42 percent had both spouses working; 28 percent had
only the reference person working; 26 percent had neither
working. In June, 32 percent had both spouses employed; 35
percent had only the reference person working; 26 percent had
neither working.
o The upper bound estimate of the number of families where the
spouse went into the labor force because the reference person
lost his or her job was only 15 percent of the total number of
families with at least one spouse working sometime during the
year.
The second component of -the analysis focused on the income
patterns in poor and near-poor households. The major focus was
on four types of unearned income:
o Workmen's Compensation
o Unemployment Compensation
o Asset Income
o Other (Nonwelfare) Unearned Income.
Welfare income was given less attention because direct estimates
of welfare income are not used in the CPS-based simulation model.
Rather, welfare income is simulated from other data on the house-hold.
'
On the CPS file, part-year workers can be distinguished from
full-year workers and information is available on weeks worked
and weeks looking for work. Beyond that, little can be inferred
about individual patterns of income receipt within the calendar
year. For this reason, the analysis of unearned income patterns
from the ISDP summarized here focuses on the work/nonwork period
distinction. The patterns of unearned income receipt are based
on data on poor and near poor individuals:
o Workmen's Compensation. The ISDP data indicate that about
half the respondents who reported receiving workmen's compen­sation
(53 percent) reported receipt during the work period.
Of these, more than half (57 percent) reported receiving it
only during the work period. These results should be inter­preted
cautiously, however, because the sample was very small;
71 individuals reported receiving it during the year, of which
the vast majority (65) were part-year workers.
o Unemployment Insurance (UI). According to the ISDP data, 17.6
percent of UI recipients in the sample (poor and near-poor)
were full-year workers and 42 percent were part-year workers
33
34
~·'
reporting UI receipt while working. These seem unusually high
proportions. However, examination of the extent of the overlap
between work and UI suggests periods were ones of transition from
work to nonwork or vice versa--a finding that is supported by the
difference in UI benefit amounts according to work/nonwork
status. Persons receiving benefits during both work and nonwork
periods reported average receipts of $191 during the former and
$331 during the latter.
o Asset Income. More than half (55 percent) of the ISDP sample
of individuals in poor/near-poor households who reported
receiving asset income received it throughout the year. For
the elderly (over age 60) the proportion was much higher (72
percent). For those who did receive asset income for only
part of the year, the ISDP data cannot yield unbiased esti­mates
due to the fact that lump sum recall amounts were evenly
allocated over the relevant recall period (three or six
months). The amounts of asset income for those who reported
rece1v1ng both while working and while not working were very
similar in the two periods ($33 and $32, respectively).
o Other (Nonwelfare) Unearned Income. This category includes
regular sources (such as social security, veterans benefits,
and public and private pensions) and irregular miscellaneous
income. The patterns of other unearned income receipt by the
ISDP poor/near-poor population were very different for the
elderly and the nonelderly. Over three-quarters of the
elderly reported receiving such income continuously throughout
the year versus one-quarter of the nonelderly. The patterns
of other income receipt by the nonelderly varied by whether
they were regular or irregular sources, it appears that two­thirds
of the recipients of regular income received it for
more than a quarter of the year, half of which received it for
the full 12-month period. On the other hand two-thirds of
those receiving income from irregular sources received it for
three months or less. Finally, for the elderly, whether they
were working or not made no difference to the amount received
($325-$330 per month); but for the nonelderly the amount
received was higher during periods of work ($452 per month)
than periods of nonwork ($348 per month).
Data and
Methodology
VI. PROGRAM PARTICIPATION AND LABOR SUPPLY
BEHAVIOR OF FOOD STAMP HOUSEHOLDS
Two studies based on ISDP cross-section data deal with the rela­tionships
between program participation and labor supply deci­sions:
the work by Czajka (19R1) on determinants of participation
in the FSP and the work by Fraker and Moffitt (1985) on the
effects of food stamp benefits on the market labor of female heads
of household.
A. DETERMINANTS OF PARTICIPATION IN THE FOOD STAMP PROGRAM
It has been well established that participation in the FSP among
the eligible population has been and continues to be less than 100
percent. Policymakers, analysts, and other observers cite as
explanations such factors as complex eligibility criteria, bene­fits
being outweighed by costs for some households, the welfare
stigma, or lack of program knowledge. But measuring the extent of
and understanding the true reasons for nonparticipation depends on
adequate data. Before ISDP (with the exception of local area
studies) research was limited by the unavailability of subannual
income data and any but the most basic assets data. The 1979 ISDP
test panel--in particular Wave 2--was especially designed to yield
more accurate and detailed income and assets data for the shorter
time periods that better approximated those used in administering
the FSP. It also made possible a close look at the characteris­tics
of the eligible population and the economic, social, and
demographic factors that differentiate food stamp participants
from nonparticipants.Jj
The analysis by Czajka used Wave 2 of the 1979 ISDP test panel and
was done in terms of reference month--i.e., three months ago (month
1), two months ago (month 2), and one month ago (month 3). Refer­ence
months were used because the only calendar month common to
the entire Wave 2 sample was April 1979. The study was also
restricted to those households determined to be eligible: exclud­ing
those households reporting receipt of food stamp benefits who
were seemingly ineligible. Since households in similar circum­stances
who did not receive food stamps could not be included
among the eligibles, the inclusion of "seemingly ineligibles"
among the recipients would yield biased estimates of the effects
of household characteristics upon participation.
_l/This section summarizes John L. Czajka, Determinants of
Participation in the Food Stamp Program: Spring 1979.
Washington, DC: Mathematica Policy Research, November 1981.
Prepared for the U.S. Department of Agriculture, Food and
Nutrition Service.
35
Findings
36 ~·.
The analysis had two components. The first looked at food stamp
recipiency simply as a function of prewelfare income and total
cash income. The second employed two sets of regression equations
to estimate the net effe.ct of economic circumstances on the like­lihood
of the food stamp eligible unit or "food stamp household"
within each sample household receiving food stamps. One set of
regression equations controlled for the separate effects of pre­welfare
income, the expected value of the food stamp allotment,
employment income, whether unemployed, plus several demographic
variables. The demographic variables were included as further
measures of need, potential access to other economic resources,
and an indirect measure of perceived stigma. The other set of
regression equations controlled, in addition, for welfare receipt.
The reason for the two formulations is the potential circularity
of assuming welfare participation affects food stamp participation
when in some cases the reverse may be true.
The monthly income patterns reflected in the Wave 2 of the 1979
ISDP data provide strong evidence for the importance of income in
determining the probability that an eligible household will
participate in the FSP. Participation diminished significantly as
a food stamp househpld's prewelfare income (measured relative to
the poverty line) rose. The average net participation rate among
households with prewelfare incomes as high as three-quarters of
the poverty line or higher was only one-quarter what it was among
households with incomes less than one-half the poverty line.
Since the higher income households constituted more than 40
percent of all eligible households, their low participation
depressed the overall participation rate substantially. The
overall participation rate2/ ranged from 28 to 31 percent for the
three reference months of Wave 2 of the ISDP.
~The participation rates found in the ISDP were substantially
lower than the 61 percent found by Beebout (1981) for July 1981,
using an administrative count of food stamp recipients and a
microsimulation estimate of food stamp eligibles. Possible
explanations for this discrepancy include: (1) the Beebout
estimates are participation rates for persons while Czajka esti­mated
food stamp household participation rates. Since large
households have higher participation rates and weigh more heavily
in the computation of a person level participation rate than a
household rate, the person rate will tend to be higher; (2) Czajka
eliminated seemingly ineligible households f rom his calculations,
while Beebout's estimates include them in the numerator but not
the denominator. The inclusion of the ineligibles in Beebout's
calculations will lead to higher estimates of participation; and,
(3) there appears to have been a significant amount of underre­porting
of food stamp recipiency in Wave 2 of the ISDP. Czajka
(1982) discusses possible sources of this underreporting.
There is a puzzle, however, in that the participation rate of the
365 households with zero gross cash income did not follow the
general pattern. (Note that these were households with no welfare
income.) These households--presumably the neediest segment of the
population--accounted for 10 percent of all eligibles and had a
food stamp participation rate of only 4 to 6 percent for the three
reference months covered by the study. The most plausible
explanation is that the group included a significant proportion of
households that were in fact ineligible for the FSP but were
retained in the sample because of the i~perfect replications of
the FSP eligibility criteria. That is, some of the zero income
households had effective incomes which were not zero and as a
result were not eligible to receive food stamps. For example, the
group might have included a large number of students living away
fran home. It might have included persons whose prospective
income was not zero (for_example, persons waiting for a job to
begin or persons with relatively large assets--not large enough to
disqualify them from food stamps, but enough to allow them to
subsist without an income flow for a time). More generally, it
might have included persons whose reported income and assets
excluded important resources. It is interesting to note that even
the extremely detailed monthly data on income and assets from Wave
2 the 1979 ISDP did not resolve the puzzle of these seemingly very
poor nonrecipients.
Other economic variables appear to be much less important influen­ces
on participation than income. Liquid asset holdings did lower
the probability of participation--but only marginally. Moreover,
too few households held liquid assets of any size for this to have
much influence on the overall participation rate.
Previous studies have shown welfare recipiency to be a very
powerful predictor of food stamp use, and the present study repli­cates
these earlier findings. At the same time, however, it is
not clear what this result actually means. Food stamp recipiency
may precede welfare recipiency in some instances. In others it
may be decided .jointly with welfare. In either situation calling
welfare recipiency a determinant of food stamp recipiency may
greatly simplify reality. The strong association between welfare
recipiency and food stamp recipiency needs to be better under­stood.
Further research exploiting the longitudinal nature of
SIPP may shed more light on this relationship in two ways. First,
the actual sequencing of receipt of these two forms of transfer
income over the two to two and one-half year followup period can
be examined. The extent to which one comes before the other
versus being received simultaneously would be very informative.
Second, household decisions with regard to welfare and food stamps
should be modeled jointly, since the household may well consider
them simultaneously.
37
38
., ..
Among the sociodemographic variables examined, the number of
children under age 16 exhibited the strongest overall relation­ship
to food stamp participation. However, further research is
required to identify the source(s) of this relationship: possi­bly
the absolute level of benefits provided to large households
or the frequent inability of such households to raise their
incomes above the poverty level via the marketplace.
A sizable differential in participation by level of educational
attainment was apparent, with the less educated (fewer than six
grades) showing substantially higher participation rates than
the more educated (four or more years of college). One inter­pretation
views education in terms of the potential earnings
capacity it implies.. The distribution of eligible households by
educational attainment also provides evidence of the possible
role of education in determining the size of the eligible popu­lation:
eligible households had markedly less education than
the general population.
Participation rates among the elderly were relatively low, in
line with earlier results which might be explained by a more
extensive accounting of assets. Relatively high participation
was noted among blacks and single female-headed households.
These might be related to regional or local factors, but the
ISDP data do not contain the necessary information to find out.
B. THE EFFECTS OF FOOD STAMP PARTICIPATION ON THE MARKET LABOR
OF FEMALE HEADS OF HOUSEHOLD
Despite the wealth of literature on the effects of transfer pro­grams
on labor supply, the study by Fraker and Moffitt (1985) is
the first economic analysis of the effects of the FSP on work
effort.3/ A model of the household's joint decision regarding
market labor and participation in the Food Stamp and AFDC pro­grams
is specified and estimated on a sample of 358 female heads
of households with dependent children (using lSDP data from Wave
5).4/ The analysis sample for this initial research effort was
limited to low-income, female-headed households with dependent
2/This section summarizes Thomas Fraker and Robert Moffitt, The
Effects of Food Stamp Participation on the Market Labor of
Female Heads of Household. Washington, DC: Mathematica Policy
Research, March 1985. Prepared for the U.S. Department of
Agriculture, Food and Nutrition Service.
4/These 358 households represent 78 percen~ of all female-headed
households with dependent children in the Wave 5 sample.
The Model
children to minimize the number of programs being modeled and to
increase the interpretability of the results.2/ Estimates of
the model's parameters are useci to predict how work effort and
program participation would be affected by selected hypothetical
changes in rules governing food stamp benefit amounts. The
effects of work effort and program participation responses on
average and aggregate benefit levels are also examined.
The model of labor supply and program participation used by
Fraker and Moffitt is based on the microeconomic theory of
household decision making in the presence of limited household
resources. The household budget limitations illustrate the
combinations of goods that the household can purchase with its
entire income. In this application of the theory, a household is
assumed to weigh the tradeoff between leisure and income and then
to choose the number of hours of work per month which give it the
greatest level of satisfaction (utility). For single women with
dependent children (the largest demographic category of food stamp
recipients), the Food Stamp and AFDC programs introduce substan­tial
complications into this tradeoff. Household decisions to
participate in these programs are modeled as occurring simultane­ously
with the hours-of-work decision. The empirical
specification of the model consists of three equations:
1. A labor supply equation, in which the FSP maximum benefit and
the benefit reduction rate6/ are hypothesized to affect work
effort via the level of nonlabor income and the effective
marginal wage rate.
2. A food stamp participation equation, in which the probability
of participation in the FSP depends on the difference in
household utility when participating in the program and when
not participating.
3. An AFDC participation equation that is analogous to the FSP
participation equation.
i/The income criteria which was used to limit the sample
included: 1) hourly wage of $15 or less for the household head,
2) countable assets of $2750 or less ($4000 or less for households
with more than one person and which contain an elderly person), 3)
earnings of other adults of $2500 per month or less, 4) unearned,
nontransfer income of $1000 per month or less, and 5) transfer
income not including AFDC and UI of $1000 per month or less.
~/The maximum benefit is the level of benefits available to the
household without income. The benefit reduction rate on earnings
within .the program refers to the rate at which benefits are
reduced for each dollar of earned income.
39
Data and
Methodology
Findings
The model was estimated on the basis of 358 cases from Wave 5 of
the ISDP 1979 test panel. To avoid the severe modeling and esti­mation
problems associated with multiple, interacting programs,
the analysis was limited to low-to-moderate-income households
with dependent children headed by unmarried, nonelderly, and
nondisabled women. These households were categorically eligible
for AFDC benefits, either eligible for food stamps or able to
become eligible by reductions in hours of work, but unlikely to
be eligible for SSI or Social Security. (The Medicaid program
was not considered in this study.)
· Estimates of the food stamp and AFDC participation equations
showed that a program's maximum benefit amount (at zero hours of
work by the female head) had a statistically significant posi­tive
effect on participation in the program.?/ In contrast, and
somewhat surprisingly, a program's benefit reduction rate was
not found to significantly affect participation in that program,
although the estimates do suggest the possibility of a weak
inhibiting effect of the benefit reduction rate on program
participation.
Nonlabor income (excluding benefits from the Food Stamp and AFDC
programs) was found to have a generally insignificant effect on
participation in both programs. However, the wage rate (after
income and payroll taxes, but not after food stamp and AFDC
implicit taxes) had a significantly negative effect on partici­pation
in both programs, as expected.
Estimates of the hours of work equation indicated that the Food
Stamp and AFDC programs' maximum benefit amounts and benefit
reduction rates had statistically significant but small impacts
on work effort. The findings imply that moderate changes in
food stamp (or AFDC) regulations which alter the program's
benefit reduction rate or the maximum benefit have only small
effects on the work effort of female heads of households.
Estimates of the parameters in the three equations were used to
simulate the effects on hours of market labor and food stamp
benefit amounts of three hypothetical changes in current FSP
regulations:
1. Increasing the benefit-reduction rate (i.e., the implicit tax
rate on earned income) from .30 to .33
Llrn this study, an estimate is referred ~o as statistically
significant if a test of the hypothesis that the explanatory
variable has no impact on the dependent variable can be re.iected
at the 10 percent level of significance.