Credit Access and Supermarket Consumption Amongst the Liquidity Constrained

Project: Research project

Project Details

Description

Past research has found that individuals who use food assistance programs as well as those whose income mainly consists of Social Security payments tend to consume less food the further they are from their payment receipt date. Shapiro (2005) uses the Continuing Survey of Food Intake by Individuals to analyze the consumption patterns of food stamp recipients and finds that their caloric intake decreases by 10 to 15 percent over the food stamp month. Hastings and Washington (2010) use scanner data of food stamp recipients from three Nevada supermarket stores to find that their food expenditures decline by 34 percent from their first to fourth week of the food stamp month. Stephens (2003) uses the Consumer Expenditure Survey's Diary Survey to find that spending in the week following check receipt increases by 7 to 20 percent above mean expenditures across various categories of food for individuals for which Social Security is a significant portion of their income.

Indications are that these individuals are running out of funds towards the end of their payment month, rather than optimally choosing to consume less, and are hence prohibited from increasing their food intake. In fact, Shapiro (2005) finds that when food stamp recipients are hypothetically offered less money immediately to more in a month's time, they are more likely to take up this offer if it is towards the end of their food stamp month. Upon receiving their next payment, their food consumption spikes up. This pattern is alarming because it may indicate that individuals are not consuming adequate levels of food towards the end of their payment cycles.

In light of the difficulty that liquidity constrained individuals face in consuming a constant daily amount in the short run, I would like to investigate the effects of access to short term credit instruments, payday loans, on daily food intake patterns. Mainly I would like to answer these two questions: 1) Does access to payday loans help liquidity constrained individuals consume at more constant levels between income receipts? and 2) Does access to payday loans change the composition of supermarket purchases that liquidity constrained individuals make?
StatusFinished
Effective start/end date9/1/138/31/14

Funding

  • Purdue University (8000056292 //018000.321470)
  • Department of Agriculture (8000056292 //018000.321470)

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