transfers on farm profitability Ervin Prifti WIDER Development - PowerPoint PPT Presentation

TITLE Heterogeneous impacts of cash transfers on farm profitability Ervin Prifti WIDER Development Conference 11-13 September 2019, Bangkok, Thailand

Smallholder farming, poverty and markets No or little Limited Low access to modern human credit and inputs capital insurance Basic Limited Few technologies access to animals and inputs land Agricultural interventions insufficient to increase production

Vicious circle of poverty

Program and data • Lesotho CGP is an unconditional social cash transfer targeted to poor and vulnerable households • Eligibility of HHs in the village was based on PMT and community validation • Transfer value originally set at 360 LSL ($36, I$79) quarterly. From April 2013 indexed to number of children (360-750LSL) • Study design based on community-randomized controlled trial implemented in 96 electoral divisions. • Longitudinal study with BL in 2011 and FU in 2013 • Sample size of 1353 HHs (2706 obs) almost equally distributed • Randomization successful

Overview of the literature 33 studies 26 programs 15 countries Farm Livestock productive assets 70+ measures Land Nonfarm Savings productive assets Source: Hidobro et al. 2018

Productive asset holdings 0 % OF HOUSEHOLDS - 13 99 35 WITH FARM ASSETS NUMBER OF 44 53 97 ETH AGRICULTURAL ASSESTS % OF HOUSEHOLDS - 6 14 86 ZAM WITH LIVESTOCK - 6 NUMBER OF LIVESTOCK 12 108 ZAM % OF HOUSEHOLDS WITH ZAM 38 7 - 3 NON-FARM ASSETS 20 49 150 ZAM SAVINGS 0 LAND - 6 3 Source: Hidobro et al. 2018

Economic and productive impacts Farm inputs Labor Self-esteem and and assets use social capital Livestock Risk Crop output, accumulation management value and sales Source: Daidone et al. 2019

Empirical strategy • Mean Effects • Constant ATE 𝑧 𝑗 = 𝛽 + 𝛾𝒀 𝑗 + 𝜀𝐸 𝑗 + ε 𝑗 ෕ • ATE as a function of x: CATE • Parametric • 𝑧 𝑗 = 𝛽 + 𝛾𝒀 𝑗 + 𝜀𝐸 𝑗 + γX 𝐸 𝑗 + 𝑤 𝑗 ෕ • Semi-Parametric • 𝑧 𝑗 = 𝑔(𝒀 𝑗 ) + 𝜀 (X) 𝐸 𝑗 + 𝑤 𝑗 ෕ • Quantile Effects - QTE 𝑧 𝑗 = 𝛽 𝑟 + 𝛾 𝑟 𝒀 𝑗 + 𝜀 𝑟 𝐸 𝑗 + e 𝑗 ෕

Outcomes and covariates • Gross margin - relative measures of profitability: value of production netted of the corresponding production costs and divided by some measure of capital • Crop (CrGM) – value of crop production divided by the area of operated land • Livestock (LvsGM) - value of livestock production divided by the number of Tropical Livestock Units • Covariates – household size, share of female-headed HHs, age and education of HH head, dependency and sex ratio, operated land, irrigated land, TLUs, tractor use, shocks at community of floods and droughts, district dummies

Covariates balance BLpegg BLpwht cmcrfs_mdr BLTLUtotob BLhhsz BLlndop BLlndopirr cmdrgty BLpsrg dMaf dLer BLsexratio BLutrctr dMas BLagehd BLdepratio cmcrls_mdr cmflody BLpccons BLpmze BLedhd BLfemhd dBer BLpmlk BLdwgcropm -30 -20 -10 0 10 20

Results • Constant ATE Gross margin (crop) Gross margin (lvst) ATT 646.72** [304.67] 289.06* [169.80] • ATE as a function of x: CATE • Parametric Gross margin (crop) Gross margin (lvst) T x # members in the hh -42.786 (90.726) -185.177* (90.513) T x Age of hh head (years) -12.015 (16.544) -7.574 (8.059) T x Years of edu of hh head -19.997 (101.811) -1.630 (54.509) T x Dependency ratio -145.638* (59.009) 36.613 (38.523) T x Operated land, ha 172.678 (194.006) -18.999 (68.863) T x Herd size 1y before BL -7.907 (175.479) -38.864 (147.395) T x per capita cons exp 5.664* (2.661) 1.891 (1.693)

• Semi- Parametric -6000 -2000 -2000 -1000 -4000 2000 1000 2000 3000 0 0 4 4 Gross margin - livestock Household size Household size 6 6 Gross margin - crops 8 8 10 10 12 12 -400 -200 1000 1500 2000 2500 200 400 600 500 0 0 30 30 Gross margin - livestock 40 40 Age of head Age of head Gross margin - crops 50 50 60 60 Results 70 70 -2000 -6000 -4000 -2000 2000 4000 2000 0 0 0 0 Gross margin - livestock 2 2 Education of head Education of head Gross margin - crops 4 4 6 6 8 8 10 10 -2000 -1000 -1000 1000 1000 2000 0 0 0 0 Dependency ratio 2 Dependency ratio 2 4 4 6 6 8 8

Results • Semi- Parametric 2000 4000 1000 2000 3000 4000 3000 1500 Gross margin - crops Gross margin - crops 2000 1000 1000 500 0 -1000 0 0 0 2 4 6 0 1 2 3 4 50 100 150 200 250 Operated land, ha Herd size 1y before BL Per capita tot consumption 1000 1000 2000 Gross margin - livestock Gross margin - livestock 1500 500 500 1000 0 500 0 -500 0 -1000 -500 0 1 2 3 4 0 1 2 3 4 50 100 150 200 250 Operated land, ha Herd size 1y before BL Per capita tot consumption

Results • Quantile effects CrGM LvsGM 2000 100 𝜀 05 122.462 [176.824] 1595.865 [307.106]*** 1500 50 𝜀 10 100.234 [120.804] 995.937 [187.410]*** treatment areas 𝜀 20 1000 54.276 [115.947] 171.154 [75.779]** QTE 0 𝜀 30 47.671 [99.214] 40.141 [25.436] 𝜀 50 -50 208.275 [105.832]** 14.975 [14.574] 500 𝜀 70 365.860 [187.081]* 42.173 [33.606] -100 𝜀 80 327.846 [272.069] 123.119 [88.043] 0 𝜀 90 772.788 [417.873]* 328.259 [285.754] .05 .1 .2 .3 .5 .7 .8 .9 .95 .05 .1 .2 .3 .5 .7 .8 .9 .95 𝜀 95 Quantile Quantile 1266.092 [543.965]** 101.607 [285.002] F-test 0.034 0.000

Conclusions • In terms of heterogeneity across subgroups defined by baseline observed characteristics, we highlight that households with sufficient labor capacity (dependency ratio below 3) and with sufficient land endowment (at least 2 ha) experience bigger increases in crop profitability. • A minimum of two years of schooling and two TLUs also come out as thresholds above which recipients reap greater increases of crop profitability from the extra liquidity provided by the program . • Increases in crop profitability kick in only above a level of per capita consumption expenditure of 100 LSL. • In the livestock sector, impacts on the gross margin are greater for households with a dependency ratio above 3 and no more than 2 ha of land, which is the exact opposite profile of those that benefit more in the crop sector.

Conclusions • The program leads to greater increases in livestock profitability for those with at least 0.8 TLUs approximately and a level of per capita consumption expenditure or LSL 160, underlining the idea of some minimum endowment in order to productively benefit from the cash transfer. • Completing the profile of those that benefit more in terms of livestock gross margin is a minimum education of the household head of 2 years.