Public Transfers and Subsistence Producer Disincentives in Botswana

Tebogo Seleka and Khaufelo R. Lekobane ()
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Khaufelo R. Lekobane: Botswana Institute for Development Policy Analysis

No 37, Working Papers from Botswana Institute for Development Policy Analysis

Abstract: This paper investigates the disincentive effects of public transfers on subsistence producers in Botswana. Comparative statics analyses indicate that public transfers would not affect farm production when profit and utility maximization decisions are recursive, with the profit maximization decision made first. However, when such decisions are interdependent, public transfers would lead to a reduction in farm output. Empirical results reveal that social pensions have impacted positively on cultivated area, but have had no impact on cereal yields and output. However, government food rations have impacted adversely on cultivated area, yields and output; they are a disincentive to crop production because they are relatively more sizable, consistent and certain. This, it is argued, is because food packages are directly substitutable for subsistence crop production. Therefore, public policy in Botswana should consider moving away from food to cash transfers to minimize such disincentive effects.

Keywords: Botswana; Public transfers; Safety nets; Subsistence agriculture; Welfare dependency, Work disincentives. (search for similar items in EconPapers)
JEL-codes: E32 R10 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-03
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Citations: View citations in EconPapers (6)

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