The Impact of Government Income Transfers on Tobacco and Alcohol Use: Evidence from China

The relationship between income and health is not fully understood. In theory, income could not only provide access to preventive care and a healthy lifestyle that can help to prevent disease, but also provide access to unhealthy consumption goods such as tobacco and alcohol which raise the risk of disease. We study the impact of supplemental income on tobacco and alcohol use in China, a country where tobacco use remains highly prevalent and cancer is a leading cause of death. Our empirical strategy exploits a sharp age cutoff for program eligibility for a new government transfer program in China. Our results indicate that while the program had a large impact on income, it had no detectable impact on tobacco or alcohol use. This evidence supports the use of unrestricted income transfers as a policy that helps the poor without adverse impacts on health.