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

EfD Discussion Paper
1 January 2016

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 difference-in-difference estimator and inverse propensity score weighting, we nd 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 find no significant effects of free distribution
on fertilizer adoption or intensification. 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.

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Publication | 12 April 2016