The Food Assistance National Input-Output Multiplier (FANIOM) Model and Stimulus Effects of SNAP
by Kenneth Hanson
Economic Research Report No. (ERR-103) 50 pp, October 2010
USDA's Economic Research Service uses the Food Assistance
National Input-Output Multiplier (FANIOM) model to represent and
measure linkages between USDA's domestic food assistance programs,
agriculture, and the U.S. economy. This report describes the data
sources and the underlying assumptions and structure of the FANIOM
model and illustrates its use to estimate the multiplier effects
from benefits issued under the Supplemental Nutrition Assistance
Program (SNAP, formerly the Food Stamp Program).
What Is the Issue?
An increase in SNAP benefits provides a fiscal stimulus to the
economy during an economic downturn. When resources are
underemployed, the increase in SNAP benefits starts a multiplier
process in which inter-industry transactions and induced
consumption effects lead to an economic impact that is greater than
the initial stimulus. An input-output multiplier (IOM) model, such
as FANIOM, tracks and measures this multiplier process.
IOM and macroeconomic models have been used for assessing the
multiplier effects from government expenditures authorized under
the American Recovery and Reinvestment Act of 2009 (ARRA), a
Federal response to the recession that began in 2008. There is
potential for confusion and misinterpretation of reported
multiplier effects from different models. This report clarifies
differences in model assumptions and multipliers. It examines the
different types of multipliers for different economic variables
that are estimated by IOM and macroeconomic models, and considers
alternative estimates of the jobs impact.
What Did the Study Find?
FANIOM provides a framework for calculating different types of
multipliers for different variables at the national level.
Multipliers are calculated for production, GDP, and employment, and
they are adjusted to domestic market effects by netting out the
share of new demand met by imports. A type I multiplier includes
the direct and indirect effects from a fiscal stimulus, while a
type II multiplier also includes the induced effects from the labor
income and the type III multiplier also includes the induced
effects from capital income.
The type III GDP multiplier is the appropriate multiplier for
assessing the impact of government expenditures on economic
activity (GDP and production) during an economic downturn. The type
I employment multiplier (with import adjustment) is the appropriate
multiplier for assessing the jobs impact from government
expenditures. The jobs impacts from the FANIOM model for the type
II and type III multipliers are consistent with other input-output
multiplier models, but higher than estimates from macroeconomic
models and from empirical analysis of data on the quarter-toquarter
change in employment relative to a change in GDP.
The FANIOM analysis of SNAP benefits as a fiscal stimulus finds
• An increase of $1 billion in SNAP expenditures is estimated to
increase economic activity (GDP) by $1.79 billion. In other words,
every $5 in new SNAP benefits generates as much as $9 of economic
activity. This multiplier estimate replaces a similar but older
estimate of $1.84 billion reported in Hanson and Golan (2002).
• The jobs impact estimates from FANIOM range from 8,900 to
17,900 full-time-equivalent jobs plus self-employed for a
$1-billion increase in SNAP benefits. The preferred jobs impact
estimates are the 8,900 full-time equivalent jobs plus
self-employed or the 9,800 full-time and part-time jobs plus
self-employed from $1 billion of SNAP benefits (type I
• Imports reduce the impact of the multiplier effects on the
domestic economy by about 12 percent.
How Was the Study Conducted?
At the core of the FANIOM model are data from the U.S. Bureau of
Economic Analysis (BEA), Benchmark Input- Output Accounts for 2002.
Data from BEA National Income and Product Accounts are used to
specify the induced effects from household income (labor and
capital). Employment data from the U.S. Bureau of Labor Statistics,
U.S. Bureau of Economic Analysis, and U.S. Department of
Agriculture are used in estimating the jobs impact. The GAMS
software was used to calculate the FANIOM multipliers.