Public Safety Nets and Crowding Out Effects: Tree Growing and Livestock in Highland Ethiopia
Food insecurity is a common problem in Ethiopia because of natural (e.g. drought, flood) and idiosyncratic risks (e.g. illness). To reduce the welfare impact of risks, households use different risk coping strategies such as diversification of crops, different crop management practices, and informal risk sharing mechanisms.
However, local risk coping mechanisms are not adequate to ensure food security, and households are often forced to liquidate their assets in times of shocks. In response to this, the government of Ethiopia in collaboration with donors introduced a social protection program, the Productivity Safety Net Program (PSNP), in 2005. The program can benefit the poor in a number of ways. It can provide a safety net for the poor and prevent them from selling their assets or using their savings in times of shocks. It can also reduce seasonal liquidity constraints and reduce subjective discount rates and thereby stimulate investments in inputs and technology. In addition the public work can be used to create valuable public goods such as infrastructure and soil and water conservation and thereby further stimulate investments. However, the program can have undesirable impacts on on-farm production and private investments. Allocating family labour for public work programmes may reduce available labour for on-farm production and investments. In addition, a public safety net may reduce the demand for other risk coping strategies. There is evidence that earlier public programmes (e.g. food-for-work) have had negative impacts on growth rates in livestock holdings, soil and water conservation investment, and agricultural intensification. Knowledge of how public safety net programs work and their impact on household welfare will assist policy makers to frame or improve the programs.
This project is developed to study the impact of PSNP on investments in productive assets (specifically, livestock and trees) in times of temporary income shocks. This objective will be addressed using panel data and program evaluation techniques.
Alemu Mekonnen, Environmental Economics Policy Forum for Ethiopia/Addis Ababa University; Jesper Stage, University of Gothenburg; Camilla Andersson, Umeå University
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