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.