NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, June 9, 2014

As solutions to global poverty go, “just give poor people money” is pretty rock solid. A recent randomized trial found that Kenyans who received no-strings attached cash from the charity GiveDirectly built more assets, bought more goods, were less hungry, and were all-around happier than those who didn’t get cash.

But voters and politicians generally prefer giving people specific goods — like housing, food, or health care — rather than plain old cash, for fear that the cash might get misused by unscrupulous poor people. Maybe the recipients will just blow the cash drinking! This particular concern comes up both in domestic and global poverty conversations; Fox News is obsessed with the possibility of people using federal government benefits like food stamps to buy fancy seafood or hang out at strip clubs, but mainstream global development experts often express these concerns too. As Paul Niehaus, the founder of GiveDirectly, once put it, “It is pretty ironic the number of conversations I have had with development people about the poor and their drinking—over drinks.”

Now, the World Bank’s David Evans and Anna Popova are out with a new paper reviewing what evidence is out there about aid to the global poor and alcohol/tobacco consumption.* They found 19 studies which attempted to measure the effect of cash transfers — both no strings attached ones and ones families receive if they fulfill certain conditions, like school attendance — on the purchase and consumption of “temptation goods”; the studies contained a total of 44 estimates of cash’s effect in various contexts. 82 percent of those estimates showed that the transfers reduced consumption of or spending on alcohol and tobacco. The vast majority of those weren’t statistically significant, so the best conclusion is that there’s no evidence transfers affect drinking or smoking behavior.