It is increasingly common for governments to give poor people money. Rather than grant services or particular goods to those in poverty, such as food or housing, governments have found that it is more effective and efficient to simply hand out cash. In some cases, these cash transfers are conditional on doing something the government deems good, like sending your children to school or getting vaccinated. In other cases, they’re entirely unconditional.
For decades, policymakers have been concerned that poor people will waste free money by using it on cigarettes and alcohol. A report on the perception of stakeholders in Kenya about such programs found a “widespread belief that cash transfers would either be abused or misdirected in alcohol consumption and other non-essential forms of consumption.”
The opposite is true, according to a recently published research paper (paywall) by David Evans of the World Bank and Anna Popova of Stanford University.
Evans and Popova’s research is based on an examination of 19 studies that assess the impact of cash transfers on expenditures of tobacco and alcohol. Not one of the studies found that cash grants increase tobacco and alcohol consumption and many found that they lead to a reduction. The researchers also conducted a meta-analysis—a statistical technique for combining the results from across studies—and again found that, overall, receiving cash slightly reduced tobacco and alcohol consumption.