How Important Is Temptation Spending? Maybe Less than We Thought - Economic Study on Randomized Exposure to Temptation

Jul 19, 2026

Upload by Asher

Temptation plays a central role in spending and saving models for developing countries, yet existing empirical evidence offers limited clarity on its real-world importance. This study expands the evidence base by testing randomized exposure to temptation during cash payments in rural Malawi. Findings show that a more tempting environment does not significantly change temptation spending, consistent with cash-transfer research. Effects and measured temptation spending levels vary with the definition used. The paper explores drivers of null results and suggests temptation may have a limited role for the poor.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages22

Reading Time55 min

Introduction

Policy relevance of temptation spending

Research design and experimental setting

Randomized exposure to temptation in rural Malawi

Holding transaction costs constant

Results and sensitivity to measurement

Treatment effects on spending

Dependence on the definition of temptation spending

Interpretation and implications

Pub lic Disclosure Authorized Pub lic Disclosure Authorized The World Bank Economic Review, 36(2), 2022, 433–454 [https://doi.org10.1093/wber/lhab027](https://doi.org10.1093/wber/lhab027) Article How Important Is Temptation Spending? Maybe Less than We Thought Lasse Brune, Jason T. Kerwin , and Qingxiao Li Abstract 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. JEL classification: D90, D91, O12 Keywords: temptation spending, self-control, behavioral economics, development economics Does temptation play a major role in the spending decisions of the poor? Prominent theoretical work suggests that it does (Banerjee and Mullainathan 2010), and policymakers are often concerned that participants will mis-spend cash transfers on temptation goods (Harvey 2007; Ikiara 2009; Evans and Popova 2017) . Temptation goods are typically defined by researchers to include goods that are commonly perceived as harmful (as in Evans and Popova 2017) or that the people themselves would prefer not to buy when asked at a different time (as in O’Donoghue and Rabin 1999) . Since temptation goods are valued only in the moment, and not ahead of time, that money is as good as wasted. Despite the important role of temptation in both theory and policy, empirical evidence suggests that temptation spending is either unchanged or reduced by cash transfers on temptation goods (see Evans and Popova 2017, for an in-depth literature review on the impact of cash transfers on expenditures for temptation goods) . The Lasse Brune is a research assistant professor at the Global Poverty Research Lab at Northwestern University, in Evanston, IL; his email is [lasse.brune@northwestern.edu. Jason Kerwin](lasse.brune@northwestern.edu. Jason Kerwin) (corresponding author) is an assistant professor in the Department of Applied Economics at the University of Minnesota, in Saint Paul, MN, and an affiliated professor at J-PAL; his email is [jkerwin@umn.edu. Qingxiao Li](jkerwin@umn.edu. Qingxiao Li) is a postdoctoral scholar in the Department of Applied Economics at the University of Minnesota, in Saint Paul, MN; his email is [lixx5376@umn.edu. We thank Marc Bellemare](lixx5376@umn.edu. We thank Marc Bellemare), Jeff Bloem, Audrey Dorélien, Anett John, Mike Kuhn, Soomin Lee, Joe Ritter, Laura Schechter, and Dan Silverman for helpful comments. We are grateful for research support from the IPA/Yale Savings and Payments Research Fund (funded by the Bill and Melinda Gates Foundation), the University of Michigan Population Studies Center, and the Michigan Institute for Teaching and Research in Economics. Kerwin’s work on this study was supported in part by an NIA training grant to the Population Studies Center at the University of Michigan (T32 AG000221), as well as by fellowship funding from the Rackham Graduate School. This study is registered with the AEA RCT Registry under registration number AEARCTR-0000437. All errors and omissions are our own’. A supplementary online appendix for this article can be found at The World Bank Economic Review website. © The Author(s) 2022 . Published by Oxford University Press on behalf of the International Bank for Reconstruction and Deve

FAQs

What question does the paper investigate about temptation spending?

The paper asks whether temptation meaningfully affects the spending decisions of people in poor countries, and whether cash payments increase temptation-related expenditures.

How does the study vary exposure to temptation?

Workers in the treatment group collect pay at a weekly market on market day, while the control group collects pay at the same location one day before, creating different exposure to a tempting environment.

What do the main findings show?

Direct exposure to the tempting market environment at the time of payment produces no appreciable changes in expenditure, including temptation spending. Magnitudes of temptation spending and treatment effects are sensitive to how temptation spending is defined.

Jul 19, 2026

Upload by Asher