Does the benefits schedule of cash assistance programs affect the purchase of temptation goods? Evidence from Peru

Abstract

A critique of cash assistance programs is that beneficiaries may spend the money on “temptation goods” such as alcohol and tobacco. We exploit a change in the payment schedule of Peru’s conditional cash transfer program to identify the impact of benefit receipt frequency on the purchase of temptation goods. We use annual household data among cross-sectional and panel samples to analyze the effect of the policy change on the share of the household budget devoted to four categories of temptation goods. Using a difference-in-differences estimation approach, we find that larger, less frequent payments increased the expenditure share of alcohol by 55–80% and sweets by 10–40%, although the absolute magnitudes of these effects are small. Our study suggests that less frequent benefits scheduling may lead cash recipients to make certain types of temptation purchases.

How does income affect mental health and health behaviours? A quasi-experimental study of the earned income tax credit

“…9 The type of income may also matter: some studies have shown that infrequent cash benefits increase expenditures on 'temptation' goods such as alcohol relative to more frequent benefits. 10 Income insecurity may impact healthcare utilisation (eg, reduced access to, use of, and quality of mental healthcare). 11 Despite the associations between income and health, existing evidence is often correlational, and there are limited studies-especially in the US-that test the effects of interventions or policies to address poverty on mental health and health behaviours.…”

Universal Cash and Crime

“…For example, an income effect from the cash transfer could relieve financially stressed individuals, thereby reducing the need to engage in financially motivated crimes, such as burglary, robbery, and theft (Foley, 2011;Mejia & Camacho, 2013;Chioda, De Mello, & Soares, 2016;Carr & Packham, 2019). The income effect can also act in the opposite direction as cash recipients increase their consumption of normal goods, including those that are complements to crime, such as leisure, drugs, or alcohol (Riddell & Riddell, 2006;Dobkin & Puller, 2007;Evans & Popova, 2014;White & Basu, 2016;Castellari et al, 2017). A cash transfer may also increase the supply of cash and purchased goods available to potential offenders in the streets, thereby increasing the expected utility of crime through a "loot effect," leading to an increase in financially motivated crimes (Borraz & Munyo, 2015;Wright et al, 2017).…”

Effects Of Alternative Food Voucher Delivery Strategies On Nutrition Among Low-Income Adults

“…To further improve nutrition assistance programs, behavioral economists have also suggested increasing the frequency of the benefit delivery. 8,9 Program benefits delivered in a monthly lump sum may contribute to a "consumption cycle"-the tendency for low-income Americans to spend their benefits immediately after receiving their monthly payment and then have limited money for food by month's end. [10][11][12][13] Programs that provide food benefits in smaller increments distributed throughout the month may smooth this cycle and counteract the tendency to use once-monthly funding installments for purchasing caloriedense processed foods immediately upon receipt of funds.…”

“…[10][11][12][13] Programs that provide food benefits in smaller increments distributed throughout the month may smooth this cycle and counteract the tendency to use once-monthly funding installments for purchasing caloriedense processed foods immediately upon receipt of funds. 8,9,14 Whether nutrition assistance programs that increase the frequency of benefit delivery could meaningfully modify dietary intake has not been assessed in a randomized trial.…”