Do Cash Transfers Foster Resilience? Evidence from Rural Niger

Abstract

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. They often also aim to offer protection against shocks, but their role in fostering resilience has been less studied. This paper assesses whether the beneficiaries of a multiyear government cash transfer program in rural Niger are better able to mitigate the welfare effects of drought shocks. It analyzes mechanisms through which cash transfers contribute to resilience, such as savings facilitation, asset accumulation, or income smoothing in agriculture and off-farm activities. It combines household survey data collected as part of a randomized control trial 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. Cash transfers increase savings. They also help households protect earnings in agriculture and off-farm businesses when shocks occur. Few differences in household durables or livestock are observed. Overall, these findings suggest that cash transfer programs targeting poor households can foster resilience by facilitating savings and income smoothing.