Cash Transfers and Temptation Goods

This study by David K. Evans & Anna Popova reviews evidence from 1997 to 2014:

Across 44 estimates from 19 studies, we find that almost without exception, studies find either no significant impact or a significant negative impact of transfers on expenditures on alcohol and tobacco [emphasis added]. This finding is similar whether the analysis includes experimental and quasi- experimental designs or if it is restricted to randomized trials alone. Likewise, studies that have tried to quantify the proportion of beneficiaries who spend transfers on temptation goods find negligible effects. This result is consistent across the world, supported by data from Latin America, Africa, and Asia. It is also consistent across conditional and unconditional cash transfer programs. The evidence suggests that cash transfers are not used for alcohol and tobacco at any significant levels. p. 3 

The definition of "temptation goods:"

"... [g]oods that generate positive utility for the self that consumes them, but not for any previous self that anticipates that they will be consumed in the future.” p. 2

In terms of behavioural economics "[T]hese studies suggest that households may indeed treat transfer income differently from earned income."

It is interesting that contrary to the quantitative studies reviewed in the paper, some qualitative ones (like those based on focus groups, for example) report use of transfers in consumption of temptation goods. The authors try to conciliate the difference and conclude that quantitative studies are important to complement qualitative ones.

HT: Jacob A. Jordaan