An evaluation of the effect of cashing out food stamps on food expenditures

The Omnibus Budget Reconciliation Act (OBRA) of 1981 required that the Commonwealth of Puerto Rico's participation in the US Food Stamp Program (FSP) be replaced by an annual $825-million block grant to provide food assistance for the needy. In response, the commonwealth designed a Nutrition Assistance Program (NAP), which was implemented on July 1, 1982. Under NAP, food coupons have been replaced by monthly checks that are freely negotiable for currency. Because of concern that cash assistance would weaken the link between program benefits and food consumption, OBRA of 1982 required the commonwealth to return to the food coupons. Implementation was delayed until July 31, 1985, and the Secretary of Agriculture was required to evaluate the Puerto Rican program. Data were obtained from 2 surveys: the 1977 Puerto Rico Supplement to the Nationwide Food Consumption Survey and the 1984 Puerto Rico Household Food Consumption Survey. The results of the evaluation show essentially no difference in the marginal propensity to consume food out of coupons and cash benefits with respect to total food expenditures.