Principal investigator: Eduarda Figueiredo
Original title: Is the Cure Worse than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program
Author: Katherine Meckel
Location of the Intervention: Texas
Sample Size: 11.424
Sector: Public politics
Primary Variable of Interest: Effect of EBT (voucher card)
Type of Intervention: Quantity Vouchers
Methodology: Diff-in-Diff
Summary
Quantity vouchersCard-based vouchers, which provide fixed quantities of specific products, are used by many poverty alleviation programs in the United States. Before the implementation of card technology for these programs, paper vouchers were used, which opened the door to various illegal practices from the perspective of program rules, such as price discrimination. This study sought to analyze the effect of implementing this technology on price discrimination and the well-being of participants. The results, obtained through difference-in-differences modeling, suggest ambiguous effects.
- Policy Problem
Many poverty alleviation programs in the United States provide benefits instead of money. These include the provision of... value vouchersThese programs function like in-kind funds that can only be spent on specific goods. Other programs offer... quantity vouchers, which provide fixed quantities of certain products (Currie and Gahvari, 2008; Hoynes and Schanzebach, 2015).
Os quantity vouchers These measures can be used to more effectively alter the consumption patterns of beneficiaries and to keep the real value of benefits fixed, which is useful when local price variations are not observed (Bronchetti, Christensen and Hoynes, 2019). However, participants become less sensitive to price changes, which encourages participating companies to raise their prices and, consequently, increases the tax burden of the program.
To analyze these compensations of quantity vouchersThis article, analyzed here, studies the effects of a wage reform on the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).[1] in Texas. To that end, the author generated three predictions about the effects of implementing Electronic Benefit Transfer (EBT).[2]:
- It is predicted that some stores will abandon WIC after the introduction of EBT, which could lead to drops in benefit utilization among eligible households.
- Stores with higher fixed costs of participation will be more likely to drop out.
- Stores that remain in the WIC after EBT will increase the prices they charge non-WIC customers for WIC products.
Based on these forecasts, the overall effect of EBT on social well-being is analyzed.
- Implementation and Evaluation Context
The WIC is a federal assistance program that provides low-income pregnant and lactating women and children under 5 years of age with a monthly transfer of specific quantities of nutritious food, as shown in Table 1. To be eligible, families must earn less than 185% of the federal poverty level.[3] or qualify for Medicaid[4] and be considered to be at "nutritional risk".
Participants receive quantity vouchers which can be redeemed at participating supermarkets. In addition, WIC offers participants health screenings, nutrition classes, and referrals to other social services. The literature has found that WIC improves child health, maternal health, breastfeeding, and access to other social services (Bitler and Currie, 2005; Rossin-Slater, 2013).
Table 1: Standard Benefits Packages (WIC), Texas
Source: Meckel (2020).
- Policy/Program Details
Before the payment reform, WIC participants used paper vouchers to purchase benefits. WIC stores recorded the benefit prices on the vouchers and then sent them for reimbursement. This incentivized WIC stores to charge higher prices to WIC customers than to non-WIC customers, as customer billing technologies are separate between the two groups. Price discrimination is prohibited by the program rules, but government reports conclude that it does occur, primarily in smaller stores (Government Accountability Office, 1999; Saitone, Sexton, and Volpe, 2015).
After the reform, vouchers become a smart plastic card that authorizes WIC transactions at the supermarket checkout, the Electronic Benefit Transfer (EBT). EBT integrates pricing technology into the store's electronic cash register itself, thus allowing the government to directly monitor a store's prices, forcing prices to be the same for WIC and non-WIC customers.
EBT was introduced in different groups of counties at different dates during the years 2005-2009.
- Assessment Method
Data on all food suppliers to WIC beneficiaries during the years 2007 to 2010 from the Texas Department of Health Services were used.[5]For each fiscal year, the data includes the supplier's name and address, supplier type, whether it was a new supplier in the WIC, total months of participation, and information on monitoring activities. The author limits the sample to grocery store suppliers only, which account for 95,5% of the stores in the sample. The other types of grocery stores were used as placebos.
To assess the causal effects of switching from paper vouchers to EBT, the variation in the exact timing of EBT implementation in Texas counties was explored using a Differences-in-Differences model. This compared the results for stores and participants before and after the change. Therefore, the primary variable of interest here is the effect of EBT on the fiscal year, month, and geographic unit.
- Main results
Investigations into price discrimination concluded after the EBT (Electronic Billing) resulted in sanctions. Previously, with paper vouchers, 13% of investigations resulted in some form of sanction for price discrimination. Therefore, the results are consistent with the idea that the EBT eliminates price discrimination.
The results also suggest a reduction in independent WIC stores per county of 0,11 after the implementation of EBT. For chain stores, there is also a reduction, but much smaller, of 0,06, which is not significant.
Regarding the location of WIC stores, the study results showed that for independent WIC stores the effect is imprecise. However, for chain stores there is a 10 percentage point increase in the probability of abandonment of a WIC store located in a location with a higher poverty index. Therefore, this evidence suggests that postal code poverty explains a significant portion of the variation in abandonment behavior between chain WIC stores and independent WIC stores.
The effect of EBT on prices paid by non-WIC customers shows that independent WIC stores have a 6,44% increase in the price of WIC products. For chain WIC stores, the effect on prices is small (0,10%) and not significant. These results support the author's hypothesis that WIC stores that discriminated on prices before EBT should increase the prices of WIC products, including for non-WIC customers.
The effects of EBT on welfare are ambiguous. They depend on the surplus associated with an additional household participating in WIC, the level of the price discrimination margin, and the base on which the margin is applied.
- Lessons in Public Policy
Quantity-based vouchers offer participants the same quantities of program products regardless of price, making them price-inelastic. The new technology, which switches from paper vouchers to a card, seeks to reduce price discrimination among supermarkets participating in the WIC. Therefore, the results suggest that the implementation of EBT was successful in reducing price discrimination, but also increased the abandonment of stores in the program. Therefore, an ambiguous effect.
References
Bitler, Marianne P., and Janet Currie. 2005. “Does WIC Work? The Effects of WIC on Pregnancy and Birth Outcomes.” Journal of Policy Analysis and Management 24 (1): 73-91.
Bronchetti, Erin T., Garret S. Christensen, and Hilary W. Hoynes. 2019. “Local Food Prices, SNAP Purchasing Power, and Child Health.” Journal of Health Economics 68: 102231. https://www.sciencedirect.com/science/article/abs/pii/S0167629619304151.
Currie, Janet, and Firouz Gahvari. 2008. “Transfers in Cash and In-Kind: Theory Meets the Data.” Journal of Economic Literature 46 (2): 333-83.
Government Accountability Office. 1999. Efforts to Control Fraud and Abuse in the WIC Program Can Be Strengthened. Washington, DC: Report to Congressional Committee GAO-RCED-99D224GAO.
Hoynes, Hilary, and Diane Whitmore Schanzenbach. 2015. “US Food and Nutrition Programs.” In Economics of Means-Tested Transfer Programs in the United States, Vol. 1, edited by Robert A. Moffitt, 219–301. Chicago: University of Chicago Press.
Rossin-Slater, Maya. 2013. “WIC in Your Neighborhood: New Evidence on the Impacts of Geographic Access to Clinics.” Journal of Public Economics 102 (C): 51–69.
Saitone, Tina L., Richard J. Sexton, and Richard J. Volpe. 2015. “A Wicked Problem? Cost Containment in the Women, Infants and Children Program.” Applied Economic Perspectives and Policy 37 (3): 378-402.
[1] Special Supplemental Nutrition Program for Women, Infants and Children (WIC).
[2] Electronic Benefit Transfer (EBT).
[3] In 2020, the year of the study, the federal poverty level was $47.638 for a family of four.
[4] Medicaid It is a U.S. national health security program for low-income individuals. For more information: https://www.medicaid.gov/Accessed on May 13, 2024.
[5] Texas Department of State Health Services (Texas DSHS).
