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, the effect of social messaging about the appropriate use of transfers, and the effect of shifting dynamics in intra-household bargaining. The net effect is ambiguous. This paper reviews 19 studies with quantitative evidence on the impact of cash transfers on temptation goods, as well as 11 studies that surveyed the number of respondents who reported they used transfers for temptation goods. Almost without exception, studies find either no significant impact or a significant negative impact of transfers on temptation goods. In the only (two, non-experimental) studies with positive significant impacts, the magnitude is small. This result is supported by data from Latin America, Africa, and Asia. A growing number of studies from a range of contexts therefore indicate that concerns about the use of cash transfers for alcohol and tobacco consumption are unfounded.
Details
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Author
Evans, David K., Popova,Anna
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Document Date
2014/05/01
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Document Type
Policy Research Working Paper
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Report Number
WPS6886
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Volume No
1
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Total Volume(s)
1
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Country
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Region
Africa, East Asia and Pacific, Latin America & Caribbean, South Asia,
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Disclosure Date
2014/05/01
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Disclosure Status
Disclosed
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Doc Name
Cash transfers and temptation goods : a review of global evidence
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Keywords
Cash Transfer;Community-Based Conditional Cash Transfer;alternative cash transfer delivery mechanisms;cash transfer program;conditional cash transfer program;Massachusetts Institute of Technology;Democratic Republic of Congo;impact of transfer;expenditure on alcohol;statistical significance;propensity score matching;education and health;proportion of income;consumption;form of consumption;public distribution system;number of beneficiaries;risk of expulsion;senior government official;consumption of good;adolescent risk behavior;secondary school enrollment;expenditure on food;return to education;difference in outcomes;duration of treatment;consumption of alcohol;Early Childhood Development;Sexually Transmitted Infection;allocation of resource;household expenditure patterns;misuse of fund;human capital investment;effect on consumption;adolescent sexual behaviour;Sexually transmitted diseases;per capita expenditure;tobacco consumption;transfer income;substitution effect;income effect;normal good;instrumental variable;Alcohol Consumption;food expenditure;focus group;standard error;
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Citation
Evans, David K. Popova,Anna
Cash transfers and temptation goods : a review of global evidence (English). Impact Evaluation series ; no. IE 127,Policy Research working paper ; no. WPS 6886 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/617631468001808739/Cash-transfers-and-temptation-goods-a-review-of-global-evidence