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Abstract
The international and local Nicaraguan media have widely reported on the “coffee
crisis” in Latin America and there is substantial evidence that there has been a downturn
and that this has been more severe in the coffee-growing regions. Using household panel
data from a randomized community-based intervention carried out in both coffee- and
noncoffee-growing areas, I examine the role of a conditional cash transfer program, the
Red de Protección Social (RPS), during this downturn. While not designed as a
traditional safety net program in the sense of reacting or adjusting to crises or shocks,
RPS has performed like one, with larger estimated program effects for those who were
more severely affected by the downturn. For example, it protected households against
declines in per capita expenditures and, while not significantly depressing labor supply
relative to before the program, muted additional labor supply for beneficiaries in coffee-growing
areas, relative to their counterparts without the program. Beneficiaries who
participated in the coffee industry as laborers before the program were more likely to
have exited the coffee industry, whereas those who participated as producers were less
likely to have exited. The findings are consistent with the existence of credit constraints
inhibiting such transitions in the absence of the program. Overall, then, RPS appears to
be playing an important part in the risk-coping strategies of households.