Analysis the Effect of Hip Program Using Public Economics Theory

...

a monthly budget of $500 in total on TFVs and other SNAP foods. The graph below shows pre-transfer budget constraint, HIP budget constraint and cash equivalent budget constraint. Outcomes of HIP differs depends on customers’ preference on fruits and vegetables. If HIP participants love eating healthy food, then consumers are inframarginal(as shown in graph 1). But if they just do not like fruits and vegetables (as shown in graph 2), there is no full valuation! From lecture 6 we know that SNAP recipients respond similarly to one dollar in cash and one dollar in food stamps, in this HIP case, as long as most participants does not hate fruits and vegetables, this in-kind transfer should achieve full valuation .

③ Labor Markets Incentives

As discussed in class, means-tested, in-kind transfers can create dis-incentives to work, but in this HIP case, the incentive is capped at $60 per household per month. And the evaluation report of USDA pointed out that HIP households earned average incentives of $3.65 each month and the cap did not appear to constrain households as very very few households reached it. At such little redemption rate, we can conclude with high degree of certainty that this financial incentive does not impact citizens’ labor-leisure decision.

④ Social Welfare Function: Rawlsian SWF and Utilitarian SWF

Under Rawlsian assumption, which maximize the well-being of the worst-off member of society, the HIP should increase social welfare, citizens with lowest-income focus mainly on avoid hunger and are less picky about having fruits and vegetables instead of meat , so having such option should improve their utility. But under Utilitarian assumption, we have to take the richer non-SNAP participants’ utility into consideration. The expense of implementing HIP comes from taxpayer, but for non-SNAP participants, their utility do not increase under HIP. So the change in total utility of society is ambiguous.

⑤ Unintended Consequence

One problem arose is the promotion to general citizens, at early stage, 38% of SNAP participants responded that they have not heard of HIP and another 38% complained that it is hard to understand how it worked. Besides, the administration cost takes up most of HIP cost while incentive reimbursement only accounts for 6%, revealing inefficiency in fund using.

Also, people’s diet habit is hard to change; low-income people are used to have cheap, high-calorie fast food. Whether the 30-cents/dollar incentive is strong enough to persuade them switching to healthy diet is still a question to answer.

CONCLUSION

Findings from the HIP evaluation indicate that HIP was successful in its goal of increasing fruit and vegetable intake among pilot participants. This HIP impact is both statistically significant and large enough to be nutritionally relevant. Given the above mentioned economic theory discussion, in my opinion, the good outweighs the bad and I would recommend this HIP