Working Paper

The Impact of Safety Nets on Technology Adoption: A Difference-in-Differences Analysis

Apr 18, 2016 | Yonas Alem, Nzinga H. Broussard

This was created in partnership with Environment for Development .

Abstract

This paper contributes to a growing body of empirical literature relating credit constraints and incomplete insurance to investment decisions. We use panel data from rural Ethiopia to investigate whether participation in a safety net program enhances fertilizer adoption. Using a diff erence-in-di fference estimator and inverse propensity score weighting, we find that participation in Ethiopia's food-for-work (FFW) program increased fertilizer adoption. Results also indicate that the intensity of fertilizer usage increased with livestock holdings for food-for-work-participant households, providing some evidence that the intervention helped asset-rich farm households more than asset-poor households. We fi nd no significant e ffects of free distribution on fertilizer adoption or intensi fication. Our results are consistent with the hypothesis that safety nets can be viewed as mechanisms that allow households to take on more risk to pursue higher pro ts. The paper highlights important policy implications related to the inter-related dynamics of safety nets and extension services that aim at promoting productivity-enhancing modern agricultural technologies.