Cash Transfers, Time Discounting, and Agricultural Inputs Utilization in Lesotho

Cash transfers are shown to improve production, increase investment, and induce productive practices by farmers. Despite rich literature showing these desired outcomes, little is known about the pathways that produce these impacts. We use Lesotho’s Child Grants Program, a large-scale cash transfer program, to study if cash transfers affect input utilization by farmers through their impact on intertemporal choice. We exploit the random assignment of treatment to identify the indirect and total effect of the program and to isolate the influence of the time discounting channel. We find that cash transfers make it six percentage points more likely for households to use pesticides. Based on our preferred method, eleven percent of this effect is mediated through the increase in the patience of recipients.