The Habit-Forming Effect of Subsidies: Evidence from WIC
Saturday, November 14, 2015 : 2:45 PM
Zamora (Hyatt Regency Miami)
*Names in bold indicate Presenter
Although existing research suggests that transfer payments with vouchers that apply to a broad class of items are effectively equivalent to a cash transfer, less is known about the influence of highly targeted vouchers. This paper examines the possibility that antipoverty programs that provide highly targeted vouchers for a sustained period could persistently influence behavior after the program ends through the formation of habits. We do this in the context of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), a part of the non-traditional safety net, which provides recipients a set of vouchers for specific food items. Specifically, using two different sources of detailed scanner data, we estimate whether the changes in household purchasing patterns of WIC-eligible and WIC-ineligible products that occur during program participation persist after children in the household age out of eligibility. Further, we examine the changes in the WIC food packages implemented throughout 2009 and the variation in the length of program participation prior to the package changes to determine the persistent impact of the vouchers on household purchases. The long period during which WIC provides vouchers and the large scale of implementation set this study apart in the literature on incentives and habit formation. Overall, this project provides the first estimates of habit formation resulting from antipoverty programs and provides information about whether there are any persistent benefits from a more targeted voucher program like WIC after the participation ends.