The Effect of Irrigation on Poverty Reduction, Asset Accumulation, and Informal Insurance: Evidence from Northern Mali

SummaryThe impact of small-scale irrigation investments on household consumption, assets, and informal insurance is estimated from a panel of Northern Malian households (1998–2006). Access to irrigation increases household consumption by 27–30% relative to water-recession and rain-fed cultivators. The paper also investigates whether irrigation has secondary impacts on risk-mitigating strategies by reducing covariate risk and reinforcing informal food sharing networks that allow households to insure against idiosyncratic risk. We find that households with irrigation save between 4.5 and 6.4 more tropical livestock units and are 20% more likely to engage in informal food sharing with non-irrigators. This finding suggests that impact estimates that rely on consumption, may underestimate welfare gains by ignoring the household’s savings behavior and informal insurance network.