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

Why Giving Cash Helps Alleviate Poverty

This is an interesting piece on cash transfers by Christopher Blattman and Paul Niehaus. They mention and discuss some issues new to me, such as a possible effect of cash transfers on inflation, and why transfers do not work in certain instances: when there are positive externalities of specific types of aid, for example. 

... the forms of aid most likely to outperform cash will be those that address collective problems, or what economists term “public goods.” Consider health, for example. Say you were buying a vaccine to reduce your child’s risk of getting sick. A big part of the social value of this purchase would be reducing your neighbors’ risk of illness, too. If you had little cash to spare, the vaccine might cost more than it was worth to you but less than it was worth to the community at large. In this case, an outside group would be better placed to tend to the greater good by subsidizing the vaccine or even providing it for free. A cash transfer wouldn’t solve the social problem if the recipient had more pressing needs to spend the money on than the vaccine.

 And

Another concern about rolling out cash transfers on a large scale in developing economies is that an influx of money could lead to disruptive inflation. Whether that fear will materialize remains unclear. It will depend in large part on what the macroeconomic effects of cash transfers are compared to -- whether food aid, universal education, or other goods and services. Any large-scale influx of goods or currency has the potential to be disruptive, and so the real question is whether giving cash is worse than giving something else.

As the authors mention there is a long way ahead before transfers become the norm. The incentives, motivations, and mental models of individuals working for aid agencies are important. They might see cash transfers as simple, which takes "the fun" out of aid. That might not be the most important barrier, but worth considering. 

Former proposal of cash transfers?

In his final book Where Do We Go from Here: Chaos or Community? (1967), American civil rights leader and Nobel Peace Prize winner Martin Luther King Jr. wrote^[16]

"I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.
—from the chapter titled "Where We Are Going""

From Wikipedia.  

Cash versus Food Transfers (Niger)

From a paper by John Hoddinott, Susanna Sandstrom, & Joanna Upton (December 2013, new version). The title of the paper is "The Impact of Cash and Food Transfers: Evidence from a Randomized Intervention in Niger"

We assess the relative impacts of receiving cash versus food transfers using a randomized design. Drawing on data collected in eastern Niger, we find that households randomized to receive a food basket experienced larger, positive impact on measures of food consumption and diet quality than those receiving the cash transfer. Receiving food also reduced the use of a number of coping strategies. These differences held both at the height of the lean season and after the harvest. However, households receiving cash spent more money on agricultural inputs. Less than five percent of food was sold or exchanged for other goods. Food and cash were delivered with the same degree of frequency and timeliness but the food transfers cost 15 percent more to implement.

And from the conclusions (pp. 19-20)

The food transfers, however, cost 15 percent more to implement, as the monthly transfer value was roughly 55 USD and the modality- specific cost was 12.91 USD per food transfer and only 4.00 USD per cash transfer. This implies that had all transfers been provided in cash, coverage could have been increased by 15 percent. Given the scale of this program, that could have meant providing cash assistance to 741 additional households (roughly 5041 individuals). 

While food recipients experienced greater food security benefits in the short term, we cannot assess the relative benefits in the long term; the fact that households receiving cash spent more on agricultural inputs may mean that these households have higher incomes in the future. Finally, the specific context of this study is important. Our results are informative about the relative impacts of food and cash transfers in an extremely poor, rural setting, which is important for a number of food assistance and safety net programs. Caution should be exercised, however, in extrapolating these results to settings much different than those found in rural Niger.

Cash Transfers (empowerment and nutrition)

The chart shows some puzzling results. It is from this paper by Mara van den Bold, Agnes R. Quisumbing, & Stuart Gillespie.

Cash Transfers and Adolescent Welfare (Malawi)

Wikimedia Commons. Author: John Duffell

Adolescent girls in developing countries are considered to be an important target group for policymakers. Targeted interventions for this group may not only affect their welfare directly, but they also have the potential to bring benefits to future generations. This paper investigates whether one such intervention, the Zomba Cash Transfer Program in Malawi, helped empower adolescent girls in the short-run. Summarizing evidence from multiple papers examining the impacts of this program on a broad range of outcomes and providing some new analysis here, this paper suggests that the answer is a clear ‘yes.’ The program effectively increased access to financial resources, increased schooling outcomes, decreased teen pregnancies and early marriages, improved health, and generally enabled beneficiaries to improve their agency within their households. (p. 21).

That is from the conclusions of a paper by Sarah J. Baird, Ephraim Chirwa, Jacobus de Hoop, and Berk Özler. 

And more

The CCT program changed some common socioeconomic patterns that affect young women in Malawi, as it induced beneficiaries to delay childbearing and marriage. There is some evidence that these changed socioeconomic patterns are accompanied with changed marital and fertility preferences, suggesting that empowering adolescent women may not only increase their bargaining power within future relationships, but it may also affect the type of relationship they enter into in the first place. (p. 22).

The paper also examines Unconditional Cash Transfers (UCT), if you look at page 19 you will see that CT and UCT affect outcomes differently. Both seems very positive, but their effects on education and other indicators (such as pregnancy, etc.) are different. 

In general the evidence I have seen so far is very positive in favor of CT and UCT. And that is a kind of area where negative results are also interesting and important not only academically but from the policy point of view, so I do no think there is much publication bias, although we need consider that possibility. 

Living longer: The effect of the Mexican conditional cash transfer program on elderly mortality

Some evidence of the effect of cash transfers on health of the elderly in Mexico, from a paper by Tania Barham & Jacob Rowberry

This paper exploits the phasing-in of the Mexican conditional cash transfer program, Progresa, between 1997 and 2000, and shows a 4 percent decline in average, municipality-level mortality for people aged 65 and older. The program not only reduced deaths due to more traditional infectious diseases, but also reduced deaths due to diabetes. Given diabetes deaths are a leading cause of death in Mexico, and now in the top 10 causes of death in many high- and middle-income countries, this is an important finding.

The beneficiaries

The draft.

Cash Transfers (Zimbabwe) (Colombia)

This study by Robertson et al, was done in poor households in Zimbabwe. It compared UCT (Unconditional Cash Transfers) CT (Conditional Cash Transfers), and a control group). 

Eligible households contained children younger than 18 years and satisfied at least one other criteria: head of household was younger than 18 years; household cared for at least one orphan younger than 18 years, a disabled person, or an individual who was chronically ill; or household was in poorest wealth quintile.

Results 

1199 eligible households were allocated to the control group, 1525 to the UCT group, and 1319 to the CCT group. Compared with control clusters, the proportion of children aged 0–4 years with birth certificates had increased by 1·5% (95% CI −7·1 to 10·1) in the UCT group and by 16·4% (7·8–25·0) in the CCT group by the end of the intervention period. The proportions of children aged 0–4 years with complete vaccination records was 3·1% (−3·8 to 9·9) greater in the UCT group and 1·8% (−5·0 to 8·7) greater in the CCT group than in the control group. The proportions of children aged 6–12 years who attended school at least 80% of the time was 7·2% (0·8–13·7) higher in the UCT group and 7·6% (1·2–14·1) in the CCT group than in the control group.

Addendum
From the conclusions of a CCT study in Colombia

We find that the absence of the father decreases schooling by approximately 5 percentage points and increases participation in work by approximately 3 percentage points. We provide evidence that these effects are mainly driven by households with relatively less educated heads, which are the very poorest of the indigent households in our sample. We show that receiving CCTs offsets these adverse consequences and offers children a form of insurance when the father leaves the household permanently.

Comparing food and cash transfers (Niger)

Food and cash were delivered with the same degree of frequency and timeliness but the food transfers cost 15 percent more to implement.

Source.
HT: Mark Lee.  

Conditional cash transfers, unconditional cash transfers, and energy consumption

. . . [T]he speed at which the poor come out of poverty affects the size of this increase in energy demand, which has important implications for different countries. For example, we show that two countries that are at the same current level of income per capita may have different refrigerator ownership rates, with the country where recent growth was fast having a much higher ownership rate than the country that grew more slowly. Our model also has implications for how poverty alleviation policies such as cash transfer programs affect asset accumulation. Specifically, we show that the rate of the payments should matter for asset acquisition rates. For instance, a program that distributes transfers on a quarterly basis may lead to more refrigerator acquisition than a program that distributes transfers bi‐weekly.

That is from a new paper by Gertler et al. The title is "How Pro-Poor Growth Affects the Demand for Energy" (May 2013). 

The paper looks at the effect of energy consumption as a result of a conditional cash-transfer program. It shows that the program increases asset acquisition, some of which might have a long term effect on economic development - refrigerators. 

Conditional cash transfers usually require the receivers to do something in exchange for the transfer, for example enrolling the children in the household in primary school. This program, conditional transfers, is in contrast with another one: unconditional cash transfers, which is, as its name suggests, just giving money expecting nothing in exchange. 

A new study by Cris Blattman has called a lot of attention to unconditional cash transfers as an effective way to provide aid and promote economic development. This means that probably the best way to help the poor is to give them money, period. From a microeconomic point of view that makes sense because providing cash expands income and allows the receiver to consume a bundle of good of her choice without restrictions. In the area of promoting economic development giving cash, period! could be as revolutionary as microcredit was (at least in terms of its popularity) when it was introduced by Muhammad Yunus in the early 1980s. Micro-lending meant trusting people, poor people! It meant trusting their investment and consumption decisions.  

Giving cash might be also cheaper. You just need to give cash without thinking about all the procedures that implementing a "development program" entails. Precisely because of that we should expect some opposition to unconditional cash transfer as development strategy because it implies, at least a priori, that many people in the aid industry would lose their jobs.

Oh! And, going back to the main topic of the paper I cite above: interesting times comes for the energy industry . . . 

Cash transfers, social capital, and crime

Cash transfer programs can provide important financial support for poor households in developing countries and are becoming increasingly common. However the potential for mistargeting of program funds is high. This paper focuses on the social consequences arising from misallocation of resources in close knit communities. We find that the mistargeting of a cash transfer program in Indonesia is significantly associated with increases in crime and declines in social capital within communities. Hence poorly administered transfer programs have a potentially large negative downside that extends beyond the pure financial costs that have been the focus of the literature to date.

That is from a new paper by Cameron and Shah (July 2012).