Seminario CEDE - Yonas Alem

We identify the impact of the 2015-16 El-Niño-induced drought on the adoption of productivity-enhancing inputs and labor allocation of smallholder farmers in Ethiopia, one of the countries severely affected by the drought. The availability of nationally representative panel data collected before and after the drought on both the drought-affected and non-affected households allows the identification of the impact of the drought using difference-in-differences with propensity score matching. Contrary to the expectation, we find that the drought significantly increased the adoption of fertilizer and pesticides, but it reduced the adoption of improved seeds. We show that the primary mechanism that explains the increase in fertilizer and pesticide use is the reallocation of agricultural land from pulse cultivation to cereals, which is fertilizer and pesticide-intensive. We also find a considerable reduction in the allocation of household labor to own farming and a comparable increase in the share of labor allocated to productive safety net activities. Our findings have important implications on understanding the full cost of climate change on smallholder farmers and crafting appropriate adaptation strategies, because climate change is predicted to increase the frequency and intensity of El-Niños.