People spent 91% on food in Bihar cash transfer intervention

The possibility of spending money on alcohol etc. is one of the primary arguments against cash transfers. I had earlier blogged that these fears may be exaggerated. We have RCTs from several countries showing that this isn't the case - the poor don't spend money on alcohol if they are given cash.

This is counter intuitive to the experience of many who have visited Indian villages, where rampant alcoholism is a big problem. 

One of the reasons for the divergence from seeming reality is that spending choices depend on the labelling of money. If money is given to people, saying that it's meant for a particular purpose, they are more likely to spend only towards that activity. This is unlike salary, which comes with no strings attached, where we see the expenditure on alcohol. The other reason is that cash transferred into women's account are spent differently from those transferred to men's account.

But still, people used to ask evidence from India. We now have evidence from a conditional cash transfer intervention in Bihar regarding the amount spent on food. Remember that this intervention is in Bihar, where alcoholism is a big issue. So, this is tested in one of the areas more likely to see spending on alcohol.

Bihar started a conditional cash transfer intervention to address malnutrition in children. Each mother gets Rs.250/- per month till 2 years. She receives 2,000 bonus at the end of 2 years if the child is not under weight. She also has to adhere to certain conditions like regular visits to health centre etc.

Oxford Policy Management has evaluated this programme. They found that

1. 91% money is spent on food. Majority of the rest money is spent on health and related issues.
2. Cash given to beneficiaries was not spent on tobacco or alcohol.

This is yet another piece of evidence in the emerging literature that disputes the popularly held notions about spending patterns of the poor. There might be other reasons for choosing or not choosing cash transfers over other methods but we need to certainly place less emphasis on the concerns over spending on alcohol and tobacco.

PS: The intervention reduced "wasted children" by around 8%.

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