The role of food stamps in consumption stabilization

Although the Food Stamp Program is the largest universal entitlement program in the social safety net, little is known about its stabilizing role in household income and consumption. Using data from the Panel Study of Income Dynamics spanning 1980-99, we estimate the volatility of income with and without food stamps coupled with a variance decomposition of consumption. Among families at high ex ante risk of food stamp participation food stamps reduced income volatility by about 12 percent and food-consumption volatility by about 14 percent. There was, however, a marked decline in consumption-smoothing benefits of the program in the early 1990s relative to the 1980s.