Cash Transfers, Shocks, and Temptation Goods: Evidence from the Philippines

Abstract

We evaluate the impact of the Pantawid Pamilyang Pilipino Program, a conditional cash transfer (CCT) program in the Philippines, on alcohol and tobacco (temptation goods) expenditures in the presence of various shocks to household members such as death, illness, loss of employment, business failure, and natural or man-made disasters. Using a regression discontinuity design (RDD), we estimate whether the CCT program induces its beneficiary households to adjust their spending patterns differently from nonbeneficiaries when exposed to shocks. Our estimates show that, on average, CCT beneficiary households may allocate anywhere from 1.2 to 2 percentage points smaller share of their household income on alcohol and tobacco, relative to non-CCT beneficiary households when exposed to shocks. This result serves as suggestive
evidence against the notion of cash transfer misuse towards temptation goods when beneficiary households are exposed to various shocks.