Comparing the Productive Effects of Cash and Food Transfers in a Crisis Setting: Evidence from a randomized experiment in Yemen
The productive impacts of transfer programmes have received increased attention. However, little is known about such effects in emergency and crisis settings. Even less is known about whether transfer type – a food basket or a cash grant – influences the productive potential of such transfers. Theory suggests that, while cash transfers can relieve liquidity constraints associated with investments, subsidized food provision, by acting as a form of insurance, may prevent households from retreating to conservative income-generating strategies during volatile periods. Using a randomized field experiment in Yemen, we contrast the effects of transfer modality. The results demonstrate a modest productive impact of both modalities and suggest a role for both liquidity and price risk channels. Cash transfer recipients invested relatively more in activities with higher liquidity requirements (livestock), while food recipients incorporated higher-return crops into their agricultural portfolios.