Policy Implications of Projecting the Multiplier Effects of Social Safety Net Programs Using IMPLAN

• Published date: 01 March 2014
• Date: 01 March 2014
• Author: G. Jason Jolley,Aaron J. Nousaine,Sharon R. Paynter
• DOI: 10.1177/0160323X14521430
• Subject Matter: General Interests

General Interest
State and Local Government Review
2014, Vol. 46(1) 28-45
Policy Implications of
ª The Author(s) 2014
Reprints and permission:
Projecting the Multiplier
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DOI: 10.1177/0160323X14521430
Effects of Social Safety Net
slgr.sagepub.com
Programs Using IMPLAN:
Reevaluating the Economic
Impact of the Supplemental
Nutrition Assistance Program
Sharon R. Paynter1, G. Jason Jolley2, and
Aaron J. Nousaine3
Abstract
This study employs input–output (I/O) modeling at the state and county level to compare national
estimates of the federal Supplemental Nutrition Assistance Program (SNAP). The results show that
more localized economies cannot achieve the results predicted by national models likely because of
leakage of economic activity outside the boundaries of a single state or county. This study sheds light
on methodological tools that forecasters and policy makers can use in making decisions based on
economic impact of social safety net programs.
Keywords
multiplier effect, input–output model, food stamp, economic impact
Introduction
reliable. This is accomplished through generat-
ing economic multiplier models.
Since at least 2008, weak tax collections and a
Multipliers are used in a range of policy areas
sluggish economy have affected how state and
including economic development (Moretti 2010;
local governments provide public services
Monacelli and Perotti 2011; McGregor et al.
(Oliff, May, and Palacios 2012). Public sector
organizations initiate economic development
projects, support policy creation or change,
1 East Carolina University, Greenville, NC, USA
expand or contract service provision, make
2 Voinovich School of Leadership and Public Affairs, Ohio
infrastructure investments, or any number of
University, Athens, OH, USA
other development and policy related activities
3 Independent Researcher, Sacramento, CA, USA
based on the projections of economic impact.
Corresponding Author:
This fragile fiscal ecosystem means that to the
Sharon R. Paynter, East Carolina University, A104 Brewster
greatest degree possible, estimates of program
Building, Greenville, NC 27858, USA.
utilization and cost must be accurate and
Email: paynters@ecu.edu

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Paynter et al.
29
2000), poverty (Miguel-Velez and Perez-Mayo
national studies overstate potential economic
2010), and social safety net programs (Azis
benefit at the state and local levels. The analy-
and Mansury 2003). This is an especially
sis then builds on the modeling discussion
important consideration when local and state
through a policy debate regarding policy imple-
governments incur costs to administer and/or
mentation of social welfare programs. The
market participation in economic development
means for measuring economic impact is of
strategies or federal transfer programs. One
particular interest to how multipliers relate to
such program is the Supplemental Nutrition
decision making around federal transfer pro-
Assistance Program (SNAP, formerly food
grams implemented by states. The central ques-
stamps).
tion for this second component of the article is
SNAP is now the government assistance
whether multiplier models should be created at
program most often used by needy families and
the geographic level at which policy is funded
is a critical component of the social safety net
or that where administration and implementa-
in the United States. Multipliers generated for
tion occur.
the program as a whole (across the United
Studying economic impact analyses through
States) suggest that it generates a return of
the lens of a social safety net program is appro-
about seventy-nine cents for every dollar spent.
priate for three reasons. Food insecurity,
The problem is that multipliers with a national
defined as lacking access to enough food for
scope may not have the sensitivity to detect dif-
an active, healthy life (U.S. Department of
ferences in population, income, and industry
Agriculture [USDA] 2011), is a major public
makeup in a local or state economy and may
policy problem in the United States, and espe-
overstate local impacts. As a result, state and
cially throughout the southeastern region where
local policy makers may be left with unrealistic
more than 18 percent of households affirmed
expectations for the future.
lacking the money to purchase food on more
Improving the accuracy and reliability of
than one occasion during 2010 and 2011 (Food
local economic multipliers may be possible
Research and Action Center [FRAC] 2012a). In
through examining what geographic level is
addition, while national multiplier models exist
most appropriate for estimating economic
(see Hanson 2010; Zandi 2010) and are often
impact. The complex interactions between
cited in discussions about hunger policy, they
firms, industries, workers, consumers, house-
may be cast too broadly for decision making
holds, and institutions at different scales make
by the state or local governments that might
it important to balance the depth of information
benefit from more localized projections of
available in more localized regions with the
spending and job creation patterns.
economies of scale that arise from larger geo-
North Carolina (NC) is used as the test case
graphies. Even the methods commonly used
to study how federal subsidy programs impact
to generate multiplier estimates including static
local economies through dollar spending asso-
input–output (I/O) models (e.g., IMPLAN), as
ciated with SNAP. The state is a part of the
well as more complex econometric models
Sunbelt and Appalachian regions where pov-
(e.g., Regional Economic Models Incorporated
erty and food insecurity are persistent prob-
[REMI]) can affect the reliability of the results.
lems. There are seven food banks in NC. At
There are two purposes for this article. The
least five of those are actively engaged in for-
first is to examine economic impact multiplier
mal outreach efforts to boost SNAP participa-
models focusing specifically on the geographic
tion. As the nonprofit groups generate greater
unit of analysis as a determining factor of mul-
numbers of applicants, state and local govern-
tiplier reliability. This methodological question
ments will need to prepare for both the admin-
is aimed at whether models encompassing large
istrative and fiscal challenges of the SNAP.
geographic areas, for example national studies,
While the article uses a federal entitlement
are sensitive to the individual dynamic of state
program as an example, the intent is not to
and local economies with the hypothesis that
argue for or against the value of the program

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30
State and Local Government Review 46(1)
specifically, rather the intent is to assert that the
Over time, demand and utilization have
level of analysis—whether federal, state, or
increased (Hoefer and Curry 2012). The USDA
local—is a key component of generating reli-
reported that more than 40 million people liv-
able multiplier estimates. Results of four I-O
ing in almost 19 million households used SNAP
models are compared to those from two models
during the 2010 fiscal year (USDA 2011). By
generated for the United States. The article pro-
2012, the number rose to 46 million people
ceeds with an overview of food assistance, as
served at a cost of $81 billion in benefits (USDA
well as SNAP, to give context to the discussion.
2012b). The Congressional Budget Office esti-
The basic assumptions of I-O models are
mated that the number of SNAP participants
reviewed, as are details about techniques
doubled between Fiscal Year (FY) 2001–2005
employed. The article concludes with presenta-
and tripled between FY 2007–2011 (FitzGerald
tion of results, conclusions, and a call for future
et al. 2012). The rate of participation outpaced
research.
cost until about ten years ago when costs started
rising dramatically (see Figure 1).
Hunger and the Social Safety Net
The rise in participation and associated ben-
efits spending is due to the Great Recession and
in the United States
weak economy, as well as expanded eligibility
Adequate nutrition is a cornerstone for healthy
criteria authorized by the enactment of the
living, development, and prosperity. Even so,
American Recovery and Reinvestment Act of
hunger has been a persistent problem in the
2009 (FitzGerald et al. 2012; Geewax 2011).
United States throughout its history. With the
Overall, SNAP has reduced the overall level
onset of the Great Depression, the issue became
of food insecurity among low-income house-
a part of the public agenda. As the federal gov-
holds in the United States (Lombe, Yu, and
ernment developed programs to address hun-
Nebbitt 2009).
ger, the first version of SNAP originated in
Even so, the program has substantial public
1939. In 2008, the reauthorization of the Farm
cost in addition to benefits provided by the fed-
Bill resulted in renaming the program SNAP,
eral government for food. Though the federal
rather than Food Stamp Program (USDA
government pays about half of the administra-
2011). It is now the largest nutrition assistance
tive costs for the program, states must bear
program in the United States and represents the
administrative costs known as ‘‘Maintenance
majority of federal funding for USDA.
of Effort’’ (MOE) to receive federal transfer
There are a number of rules associated with
payments for many federal grant programs
SNAP (USDA 2012d). Participants cannot buy
including SNAP. MOE requirements are
alcoholic beverages, nonfood, hot food, or
designed to ensure that a state uses its own
...