Cash Transfers, Negative Rainfall Shocks and Child Welfare in Ethiopia

Abstract

Abstract This study examines the role of cash transfers in mitigating the welfare impact of negative rainfall shocks on children in rural households. Household-level panel data, obtained from areas where Ethiopia’s Social Cash Transfer Pilot Programme operated, are merged with available climate data. The results from a two-way fixed effects model reveal that cash transfers significantly reduce the negative effect of drought on food consumption Z-score of children in beneficiary households. As the magnitude of drought increases, however, no difference in children’s FCS Z-score is found between beneficiary and non-beneficiary households. The study provides evidence for household food consumption-based coping strategies as a mechanism. As such, beneficiary households are able to avoid food consumption-destabilising coping strategies as long as the droughts they experience are not of high magnitude. The findings of this study offer policy-relevant insights into the extent to which cash transfers can buffer the adverse welfare impact of drought on children.