A central question in public finance, one that has generated decades of research, is how tax and transfer programs affect labor supply. Treating food stamp benefits as an income transfer, Research Affiliate Hilary Hoynes uses a quasi-experimental approach to estimate the impact of the program on labor supply.

Summary:

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