Cash Transfers: The poor don't spend money on alcohol

Two common fears are cited regarding unconditional cash transfers. One, it encourages the poor to be lazy. Two, the poor will "waste" money on alcohol, tobacco etc. It's a reasonable inference from anecdotal experiences.

Like many other cognitive traps that blinker our world view, mental models influenced by anecdotes make it difficult for us to think beyond the cognitive walls. Influenced by experience, one finds it hard to imagine the poor not spending money on alcohol if they are given unconditional money.

Like many other mental models and cognitive traps punctured by the RCTs, these mental models are also being slowly chipped off by emerging evidence on cash transfers.

On cash transfers making people lazy:  

Abhijit Banerjee's documents evidence regarding this in his paper "Debunking the Stereotype of the Lazy Welfare Recipient:Evidence from Cash Transfer Programs". The finding is that
Data from 7 studies (RCTs) across the world (Mexico, Morocco, Honduras, Nicaragua, the Philippines and Indonesia) suggests that there is "no systematic evidence that cash transfers discourage work" (make people lazy).  
On the poor spending money on alcohol, tobacco:

Abhijit Banerjee in his article "Policies for a better fed world" says
almost all of the studies that ask this question consistently deliver one piece of good news—we do not find evidence that the cash transfers are more likely to be used for buying alcohol or intoxicants—not only are the effects not significant, they are actually small or even negative
David Evans of World Bank has a new meta-analysis of 19 research studies that probe this question. The analysis says
(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. We 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, equal to −0.18 standard deviations. 
It's important to note one nuance here. The evidence doesn't compare "the proportion of money obtained through cash transfers that's spent on alcohol" and "proportion of wage income spent on alcohol" and find the former proportion to be lower than the latter. As David Evans clarifies in the comments section of his blog post, the evidence says that "the absolute amount that people are spending on alcohol and tobacco falls when their incomes rise from cash transfers. Not just a lower proportion. So they are in fact NOT spending cash transfers on alcohol and tobacco."

This calls for a significant updation of our mental priors and biases. The evidence is contradicting what's supposedly intuitively obvious. It doesn't mean that no one spends on alcohol. It means that our mental model of "all those receiving money lining up at the alcohol shop" is an exaggeration. People spending (cash transfers') money on alcohol may be an exception but not a norm as we think.

Of course, it may vary with context but the evidence suggests that we should at least reconsider the weight assigned to these arguments. David Evans writes this in his blog
So you can be for cash transfers or against cash transfers, but don’t be against them because you think the poor will use the money on temptation goods. They won’t.
It's a good example of how intuitively obvious reasoning and strong anecdotal evidence can blinker our thinking. The question then is - why is the evidence contrary to our intuition?

The answer may lie in 'labelling effect' as it is called. Essentially it means that labelling the money during its distribution matters. If you label money as "money for your child's bicycle", there is a great chance that families might spend it on their child's bicycle instead of spending on something else. Similarly, if you label it as "this money is for the betterment of your family", they might spend it differently.

People's usual wage income doesn't come with this labels, so its spending pattern is different. The evidence suggests that spending pattern of money earned through wages can't be extended to money obtained through other means. 

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