The effect of food stamps on labor supply: A bivariate selection model

Although there is a large literature on the effects of U.S. transfer programs on labor supply, this is the first such study of the Food Stamp Program. We model the nonlinearity and nonconvexity of the budget constraint and use maximum-likelihood methods to estimate hours- of-work functions for female heads of household, the largest recipient group in the program. We also model the joint response to AFDC and Food Stamps and we account for the existence of a significant number of eligible households who do not participate in the programs. A three- equation, bivariate selection model is estimated on a sample of eligible households with maximum likelihood.