Cash transfers can improve education and health outcomes and alleviate poverty in a variety contexts. However, policy makers and others often express concern that poor households will use these transfers to buy alcohol, tobacco, or other “temptation goods.”
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. The authors 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. 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.