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Cash Transfers and Temptation Goods

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  • David K. Evans
  • Anna Popova

Abstract

Cash transfers have been demonstrated to improve education and health outcomes and alleviate poverty in various contexts. However, policy makers and others often express concern that poor households will use transfers to buy alcohol, tobacco, or other “temptation goods.” The income effect of transfers will increase expenditures if alcohol and tobacco are normal goods, but this may be offset by other effects, including the substitution effect and the effect of social messaging about the appropriate use of transfers. The net effect is ambiguous. This article reviews 19 studies with quantitative evidence on the impact of cash transfers on temptation good expenditure, as well as 11 studies that surveyed whether respondents reported they used transfers to purchase temptation goods. We conduct a meta-analysis to gauge the average impact of transfers on temptation goods. Results show that on average cash transfers have a significant negative effect on total expenditures on temptation goods, equal to −0.18 standard deviations. This negative result is supported by data from Latin America, Africa, and Asia, for both conditional and unconditional cash transfer programs. A growing number of studies therefore indicate that concerns about the use of cash transfers for alcohol and tobacco are unfounded.

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  • David K. Evans & Anna Popova, 2017. "Cash Transfers and Temptation Goods," Economic Development and Cultural Change, University of Chicago Press, vol. 65(2), pages 189-221.
  • Handle: RePEc:ucp:ecdecc:doi:10.1086/689575
    DOI: 10.1086/689575
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    3. Grogan, Louise, 2018. "The Labeling Effect of a Child Benefits System: Evidence from Russia 1994-2015," IZA Discussion Papers 11962, Institute of Labor Economics (IZA).
    4. Momi Dahan, 2021. "Poverty and economic behavior: gambling on social security paydays," International Gambling Studies, Taylor & Francis Journals, vol. 21(1), pages 38-58, January.
    5. Palacios, Alfredo, 2016. "Impacto de los Programas de Transferencias de Ingresos en la Calidad de la Vivienda Familiar: Evidencia para el Plan de Inclusión Social, Argentina [Impact of Cash Transfer Programs on the Quality ," MPRA Paper 102482, University Library of Munich, Germany.
    6. Maitreesh Ghatak & François Maniquet, 2019. "Universal Basic Income: Some Theoretical Aspects," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 895-928, August.
    7. Ohrnberger, Julius & Anselmi, Laura & Fichera, Eleonora & Sutton, Matt, 2020. "The effect of cash transfers on mental health: Opening the black box – A study from South Africa," Social Science & Medicine, Elsevier, vol. 260(C).
    8. Christopher Blattman & Julian C. Jamison & Margaret Sheridan, 2015. "Reducing crime and violence: Experimental evidence from cognitive behavioral therapy in Liberia," NBER Working Papers 21204, National Bureau of Economic Research, Inc.
    9. Brett Watson & Mouhcine Guettabi & Matthew Reimer, 2020. "Universal Cash and Crime," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 678-689, October.
    10. Jörg Peters & Jörg Langbein & Gareth Roberts, 2018. "Generalization in the Tropics – Development Policy, Randomized Controlled Trials, and External Validity," World Bank Research Observer, World Bank Group, vol. 33(1), pages 34-64.
    11. Roelen, Keetie & Delap, Emily & Jones, Camilla & Karki Chettri, Helen, 2017. "Improving child wellbeing and care in Sub-Saharan Africa: The role of social protection," Children and Youth Services Review, Elsevier, vol. 73(C), pages 309-318.
    12. Mohammad Rasoolinejad, 2019. "Universal Basic Income: The Last Bullet in the Darkness," Papers 1910.05658, arXiv.org.
    13. Brudevold-Newman, Andrew & Honorati, Maddalena & Jakiela, Pamela & Ozier, Owen, 2017. "A Firm of One's Own: Experimental Evidence on Credit Constraints and Occupational Choice," IZA Discussion Papers 10583, Institute of Labor Economics (IZA).
    14. Ana Maria Buller & Amber Peterman & Meghna Ranganathan & Alexandra Bleile & Melissa Hidrobo & Lori Heise, 2018. "A Mixed-Method Review of Cash Transfers and Intimate Partner Violence in Low- and Middle-Income Countries," World Bank Research Observer, World Bank Group, vol. 33(2), pages 218-258.
    15. Noray, Savannah & Janzen, Sarah A., 2017. "Household Migration and Expenditure Decisions," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258539, Agricultural and Applied Economics Association.
    16. Jose Cuesta & Mario Negre & Ana Revenga & Maika Schmidt, 2018. "Tackling Income Inequality: What Works and Why?," Journal of Income Distribution, Ad libros publications inc., vol. 26(1), pages 1-48, March.
    17. Pega, Frank & Gilsanz, Paola & Kawachi, Ichiro & Wilson, Nick & Blakely, Tony, 2017. "Cumulative receipt of an anti-poverty tax credit for families did not impact tobacco smoking among parents," Social Science & Medicine, Elsevier, vol. 179(C), pages 160-165.
    18. Shapiro, Jeremy, 2019. "The impact of recipient choice on aid effectiveness," World Development, Elsevier, vol. 116(C), pages 137-149.

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