2021
Language:
English

Cash transfers, climatic shocks and resilience in the Sahel

Policy makers are increasingly interested in strategies to promote resilience and mitigate the effects of future climatic shocks. Cash transfer programs have had widely documented positive welfare impacts. While cash transfers are often used to protect households against shocks, their role in fostering resilience has been less studied. This paper assesses whether small regular cash transfers strengthen poor households’ ability to mitigate the welfare effects of drought shocks. It analyzes mechanisms through which cash transfers contribute to resilience, including savings, asset accumulation or income smoothing in agriculture and off-farm activities. It combines household survey data collected as part of a randomized control trial in rural Niger with satellite data used to identify exogenous rainfall shocks. The results show that cash transfers increase household consumption by about 10 percent on average. Importantly, this increase is mostly concentrated among households affected by drought shocks, for whom welfare impacts are larger than transfer amounts. This result is explained by households’ increased ability to protect earnings in agriculture and off-farm businesses when shocks occur. Findings show that multiyear cash transfer programs targeting poor households can effectively foster resilience by facilitating household savings and income smoothing.