The two approaches are both under consideration by the US Department of Agriculture as possible ways to improve nutrition for those in lower income groups. Poor nutrition has been linked to a number of chronic diseases, including heart disease, high blood pressure, obesity and diabetes, with associated high medical costs, and diet quality is a particular problem for low-income Americans. Therefore, finding an effective policy solution has become a priority.
The study, published in Contemporary Economic Policy, looks at different ways in which alternative strategies could be used to increase consumption of under-consumed foods, such as fruit, vegetable and dairy products for participants of the Food Stamp Program, officially known as the Supplemental Nutrition Assistance Program, or SNAP.
Using econometric models, price elasticity estimates and nutrition recommendations based on the 2005 Dietary Guidelines for Americans, the authors first examined how a ten percent subsidy on fruit, vegetables and milk would affect current low consumption of these foods.
Cost and benefit of subsidies
They found that such a subsidy could close the deficiency of these foods by four to seven percent.
“A price subsidy of 22 percent is required in order to close the consumption gap by 10 percent for vegetables,” they wrote.
The authors estimated the cost of a ten percent price subsidy at an annual $293m for vegetables, $281m for fruits (including $184 million for non-juice fruits and $97 million for fruit juice), and $160 million for fluid milk, or a total of $734m a year.
Raising food stamp benefit
They estimated that raising the level of the food stamp benefit would be much more expensive in order to achieve the same increase in consumption of fruits, vegetables and milk.
“To induce a 10 percent increase in food spending, it would require an increase in food stamp benefits by about $100 per household per month or an annual cost of $14 billion,” they wrote.
In order to compare the cost effectiveness of the two models, the authors then scaled back the cost of increasing the food stamp benefit to $734m – the cost of providing a ten percent price subsidy.
“At this cost, food stamp recipients would increase their food expenditure by about
0.49 percent and narrow their consumption deficiencies of fruits, vegetables, and dairy products by 0.35–0.40 percent, much smaller than the 4–7 percent projected under the price subsidy alternative,” they wrote.
The researchers added that even though the increase in consumption resulting from price subsidy may seem small, the economic benefits could be large if cases of diet-related illness dropped, but cautioned: “The increased consumption under the two economic strategies will not direct many food stamp recipients toward the current dietary recommendation.”
The authors finally note that the purpose of their research is not to estimate the nutritional and health benefits of increased consumption but to make cost estimates that are useful to policymakers. They suggest that future research could examine the nutritional effects of changing consumption.
The number of people receiving food stamps in August 2009 stood at 36.5m – about 12 percent or one in eight Americans. Nevertheless, the authors note that spending on fruits, vegetables, and milk by food stamp households accounts for only three to five percent of total US spending on these foods.
Source: Contemporary Economic Policy
“Economic Incentives For Dietary Improvement Among Food Stamp Recipients”
Authors: Biing-Hwan Lin, Steven T. Yen, Diansheng Dong, and David M. Smallwood