Comparing the Productive Effects of Cash and Food Transfers in a Crisis Setting: Evidence from a Randomised Experiment in Yemen

Abstract

The productive impacts of transfer programmes have been receiving 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 cash transfers can relieve liquidity constraints associated with investments, but subsidised food provision, by acting as a form of insurance, may prevent households from retreating to conservative income-generating strategies during volatile periods. This report contrasts the effects of transfer modality during a randomised field experiment in Yemen. The results demonstrate a modest productive impact of both modalities and suggest a role for 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.