Temptation plays a key role in theoretical work on spending and saving in developing countries. The limited empirical evidence on its importance, however, suggests that cash transfers do not induce increases in temptation spending. This paper expands the evidence base by studying the effect of randomized exposure to temptation on spending decisions in rural Malawi. Consistent with the cash transfer literature, a more tempting environment does not induce significant changes in temptation spending. However, the magnitudes of both temptation spending levels and the treatment effects are somewhat sensitive to the definition of temptation spending used. This paper examines the potential factors that may be driving these null results, and suggests that future research may find a limited role for temptation in the economic decisions of the poor.
Bibliographical notePublisher Copyright:
© 2022 The Author(s) 2022. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK.
- behavioral economics
- development economics
- temptation spending
PubMed: MeSH publication types
- Journal Article