If you have long held the idea that poor people use social welfare grants from the state for cigarettes and alcohol, you’re going to have to think again.
It has become “increasingly common for governments to give poor people money,” suggests Quartz, because it is more effective and efficient that granting services and particular goods.
And many have thought that the money is wasted on luxuries, like alcohol and cigarettes. However recent reports have shown that, largely, this is not true.
A recently published research paper (paywall) by David Evans of the World Bank and Anna Popova of Stanford University shows that giving money to the poor has a negative effect on the consumption of tobacco and alcohol. Evans and Popova’s research is based on an examination of nineteen studies that assess the impact of cash transfers on expenditures of tobacco and alcohol. Not one of the 19 studies found that cash grants increase tobacco and alcohol consumption and many of them found that it leads to a reduction.
In addition to looking at results from individual studies, the researchers also conducted a meta-analysis—a statistical technique for combining the results from across studies—to find the overall effect on tobacco and alcohol consumption of receiving cash. Their meta-analysis found that the overall effect was slightly negative.
The authors, Evan and Popova, then highlighted several possibilities:
One, the cash transfers may change a poor household’s economic calculus. Before receiving the cash, any spending on education or health might have seemed futile, but afterwards, parents might decide that a serious investment in their children’s school was sensible. To make this happen, it might mean cutting back on booze and smoking.
Two, there’s what economists call the “The Flypaper Effect.” Behavioural economics research shows that when money is given for a specific purpose, people and organisations do tend to use it for that purpose, even when there is no one forcing them. In the case of cash transfers, households are generally told to use the money for family welfare.
Lastly, cash transfers are usually made to women. When women rule over household income, it’s more likely to be used on food and children’s health, studies find.
What do you have to say about all this?
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