It's a widespread belief that if you give poor people cash handouts, they'll spend that money on cigarettes or alcohol. But a new study has found the opposite to be true. They will use the cash for the benefit of their families — and it may even lead to a reduction in tobacco and alcohol spending in the long run.
The study, which was conducted by David Evans of the World Bank and Anna Popova of Stanford University, looked at 19 programs around the world in which individuals were given cash transfers from the government, either as a handout or as a "reward" for something like getting kids to school on time or taking them to the doctor for checkups.
Evans and Popova looked at the impact those cash transfers had on the family budget and whether or not they led to an increase in spending on alcohol and cigarettes. What they found was that they almost always led to a reduction in a family's alcohol and tobacco purchases.
The news may surprise some people, but it's true, and the researchers have several theories about why.
One theory is that the cash transfer made things possible that once seemed impossible. Investing in their kids' education or buying healthier (and more expensive foods) may be within reach now whereas without the cash handout, these goals weren't even a possibility. So families cut back on other expenses (like alcohol and tobacco,) to make those dreams a reality.
Another theory is that people just generally seem to do what they're told. If they are given money and told to use it for their family's welfare, in most cases, they will do just that. And that leads to the third theory: These cash transfers are usually given to women, and studies show that when women control the purse strings, more money is spent on taking care of their children.
Whatever the reason for the trend, the data is clear — families that receive cash handouts don't waste the money on booze and cigarettes as was previously thought. Instead, they typically use that money for the benefit of their families. And that's money well spent.