The impact of safety nets on technology adoption: a difference-in-differences analysis

This article 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-differences estimator and inverse propensity score weighting, we find that participation in Ethiopia's food-for-work (FFW) program increased fertilizer adoption in the short run, but not in the long run. Results also indicate that the intensity of fertilizer usage increased with livestock holdings for FFW-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 profits. The results highlight the importance of safety net programs, their effectiveness in ensuring farmers that they will be protected against uninsured shocks, and how that assurance can translate into productivity-enhancing behavior.