# **Motivation**

Since the introduction of cash transfer programs, both conditional and unconditional, a major concern has been that households will misuse the cash. In Nicaragua, a senior government official expressed concern that “husbands were waiting for wives to return in order to take the money and spend it on alcohol” (Moore 2009). Interviews with stakeholders in Kenya revealed “widespread belief that cash transfers would either be abused or misdirected in alcohol consumption and other non-essential forms of consumption” (Ikiara 2009). A broader survey highlights that, “There is a widely held belief that cash given to poor people (especially to men) will be squandered on alcohol and other non-essentials” (Devereux 2002). Governments and aid agencies may worry that “men could control the cash provided and spend it on alcohol and cigarettes, rather than food for hungry children” (Harvey 2005). These concerns may explain why many countries prefer in-kind transfer programs, even though economic reasoning would suggest that cash transfers are more efficient (Case and Deaton 1998): Households can more easily meet their heterogeneous needs with liquid cash than with other, less liquid goods.

Alcohol and tobacco have been referred to as “temptation goods” (Dasso and Fernandez 2013), a term used by Banerjee & Mullainathan (2010) to refer to “goods 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.” In an earlier literature, Musgrave (1959) used a related (but more normatively charged) term, “demerit goods,” to refer to goods that were so demeritorious (either to the consumer or to others) that the government may be correct in regulating their use. That term is sometimes used in reference to alcohol and tobacco in cash transfer studies.

In this study, we use the term “temptation goods” principally to refer to alcohol and tobacco.<sup>1</sup> This study makes no normative assumption as to the value of alcohol and tobacco expenditures but merely seeks to systematically characterize the literature on the impact of cash transfers on these goods. Although alcohol and tobacco are the principal goods under consideration, some studies report other items as part of the same category, from doughnuts (Aker 2013) to soft drinks and Chinese food (Dasso and Fernandez 2013). The poor may wish to reduce spending on these items, as evidenced by a survey in Hyderabad, India, that asked households if they would like to eliminate any expenses in their budget: 28% of households identified at least one item, and the top items (44% of those) that households wanted to cut were alcohol and tobacco (Banerjee and Duflo 2007).

Most cash transfer programs are not focused on either increasing or decreasing consumption of these goods specifically, and so most evaluations and the subsequent reviews have not been

> 1 Consumption of these goods may in some cases serve positive social purposes. For example, one study recounts the anecdote of demobilized soldiers returning home in Mozambique and using some of their demobilization grant on alcohol in the context of a village celebration to assist in their reintegration (Harvey 2005).

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