How Important Is Temptation Spending? Maybe Less than We Thought

Development Policy Review, 2019

Conditional cash transfer (CCT) is increasingly being integrated into poverty reduction strategies in developing countries. However, debate remains over key elements of CCT program design. Using a discrete choice model, this paper examines Ghanaian households' preferences regarding key CCT program design elements including conditionality, targeting, and payment method. The results revealed a preference for CCT designs that target beneficiaries with limited or no productive capacity and CCT designs that are conditional on beneficiaries either investing in children's human capital or performing communal service, relative to unconditional programs. Also, direct bank deposit was revealed as the preferred payment mode relative to receipt of cash payments or use of mobile money systems.

Journal of African Economies

We perform a scientific replication of a recent paper in this journal that reports evidence from Malawi that an unconditional cash transfer programme affects psychological states, such as life satisfaction and subjective well-being, as well as economic decisions involving intertemporal choice. Using data from Zimbabwe, we find similar results. Together, these two studies are the first from outside a laboratory setting that support the idea that poverty can have psychological effects that in turn influence intertemporal choice in a way that perpetuates poverty. These results, if found to hold in diverse settings, open up the policy space for a broader range of interventions that could reduce the number of people living in poverty. As this is a relatively new idea in economics with important policy implications, replicating these results in other settings is important before they can be widely generalised.

Economic Development and Cultural Change, 2020

for their useful discussions; and three referees and an associate editor of Economic Development and Cultural Change for their constructive comments.

Economic Development and Cultural Change, 2010

The Impact of Education on the Subjective Discount Rate in Ugandan Villages * Heterogeneity in time discounting may reinforce the existing barriers to save and invest faced by rural populations in developing countries. We elicit a subjective discount rate for a varied sample of Ugandan villagers. In accordance with other studies, we have found the discount rate to decrease with education. We examine this correlation further by testing the causal effect of education and exploit two different sources of its variation: school frequency across villages and the number of the respondents' school-going years that overlap with the era of the dictator Idi Amin's rule. For men, we find that education has a significant impact on their discount rate, similar in magnitude for both types of instruments and robust to observable characteristics. This finding highlights the importance of education in development.

Journal of Policy Analysis and Management, 2018

The use of savings products to promote financial inclusion has increasingly become a policy priority across sub-Saharan Africa, yet little is known about how families respond to varying levels of savings incentives and whether the promotion of incentivized savings in low-resource settings may encourage households to restrict expenditures on basic needs. Using data from a randomized

2011

The study investigated the proposal by that rural households may be stochastically present-biased and face small fixed costs in input markets, causing them to underinvest in inputs. Supply of inputs at harvest time may then lead to higher investments than when inputs are supplied at planting time. Investment in inputs at harvest time can potentially serve as a commitment device (DellaVigna 2009). Experiments were run at harvest time and planting time to assess how a given budget was allocated for inputs or for food. Households were found to be willing to spend a significantly higher proportion of a given budget on inputs at planting time than at harvest time. A large gap between WTP and WTA prices still supports that input sales at harvest time may enhance input investments.

2019

Although households in developing and emerging countries are relatively poor, there is potential to save. For example, one study estimates that up to 8.1% of a poor household’s budget in such countries is spent on so-called temptation goods, like alcohol, tobacco, and festivals (Banerjee and Duflo, 2007). At the same time, many households are aware of the fact that they do not save enough. They name factors like self-control problems and family obligations as reasons why they cannot save more. In high income countries, default assignments already facilitate decision making in many areas of life. Among others, these could not just successfully increase organ donation rates (Johnson and Goldstein, 2003) but also retirement savings (Thaler and Benartzi, 2004). With the increased supply of formal financial services in the developing world, default assignments are also a promising and cost-effective tool for these households. Prominent studies on whether and how default assignments incre...

Interventions targeting adolescent girls are seen as a key component in the fight to break the cycle of poverty in developing countries. Policies that enable them to reach their full potential can have a strong impact not only on their own wellbeing, but also on that of future generations. This paper summarizes the short-term impacts of a cash transfer program on the empowerment of adolescent girls in Malawi during and immediately after the two-year intervention. We find that the program, which transferred cash directly to school-age girls as well as their parents, had effects on a broad range of important domains -including increased access to financial resources, improved schooling outcomes, decreased teen pregnancies and early marriages, better health -and generally enabled beneficiaries to improve their agency within their households. Underlying these overall impacts, the experiment revealed important differences in program effects between young women who were in school at the start of the intervention and those that were not, as well as between young women who received cash transfers conditional on regular school attendance and those who received cash unconditionally. The results point to the potential role that cash transfer programs can play in improving the lives of adolescent girls in Sub-Saharan Africa, as well as the heterogeneity of effects under different program designs.

Journal of Applied Economics

Inter-temporal preferences are important determinants of investment decisions, including investments in human capital. Yet, little is known about these preferences for recipients of conditional cash transfers (CCTs). We simultaneously estimate utility curvature (preference for consumption smoothing), discounting, and present biasedness for such recipients. We also introduce a financially motivated method of measuring willingness to forgo funds to control household finances. We find that female participants in a CCT program in Guatemala have very high degrees of utility curvature and low discount factors, which may lead to low levels of investment by participants in the human capital of the household. We also find that intra-household conflict is not significantly related to consumption smoothing, discounting, or present bias.

2015

This paper uses a clean experiment to investigate the impact of peer observation on the consumption decisions of rural households in Thailand. We find that those groups that observe each other show lower within group standard deviation in their decisions. At the same time, we also find that individual choice is influenced by group choice. We find that unfamiliarity with product is counteracted by peer effects. Those in a group that have higher cognitive ability are able to resist peer temptation.