What are the Enduring Effects of Fertilizer Subsidy Programs on Recipient Farm Households? Evidence from Malawi

Replaced with revised version of paper 08/23/11.fertilizer subsidies, Malawi, Sub-Saharan Africa, endogeneity, panel data, International Development, Political Economy, C23, C26, Q12, Q13, Q18,

What are the Dynamic Effects of Fertilizer Subsidies on Household Well‐being? Evidence from Malawi

This study uses household level panel data from Malawi to measure the contemporaneous and dynamic impacts of fertilizer subsidies on different indicators of household well‐being. Well‐being is measured in this paper using indicators contained in available survey data, such as area cultivated, maize production, asset wealth, respondent‐stated adequacy of food consumption and respondent-stated life satisfaction. The study uses fixed effects and instrumental variable methods to control for endogeneity caused by the non‐random distribution of targeted fertilizer subsidies. Results indicate that the quantity of subsidized fertilizer acquired by a household has a positive contemporaneous effect on area planted, area planted to maize and maize production at the household level. The subsidy also has a significant dynamic effect on the quantity of maize that households produce. Subsidized fertilizer has no significant contemporaneous or dynamic effect on household asset accumulation. Receiving more subsidized fertilizer does not make households feel that their food consumption has been adequate over the past year, but receiving more subsidized fertilizer makes household heads say that they are more satisfied with their lives. Subsidized fertilizer appears to be going to people with more land. In addition, people in villages where members of parliament reside also receive greater quantities of subsidized fertilizer. These findings raise questions about how subsidy recipients are targeted. Improving targeting could increase the positive impacts of fertilizer subsidies on household well‐being.Food Security and Poverty,

The Impact of Fertilizer Subsidies on National Fertilizer Use: An Example from Malawi

Replaced with revised version of paper 06/30/08.Agricultural and Food Policy, Crop Production/Industries,

Does Subsidizing Fertilizer Increase Yields? Evidence from Malawi

Despite their strain on government and donor budgets, fertilizer subsidies have once again become popular policy tools in several Sub-Saharan Africa countries as a potential way to increase yields in staple crops like maize. Policy makers often assume that farmers who receive the subsidy will achieve yield responses that are similar to those obtained by farmers who pay commercial prices for the input. This notion has not been verified empirically. Our study uses panel data from Malawi, a country that recently implemented a fertilizer subsidy program, to compare maize yield response to fertilizer from farmers who received subsidized fertilizer with yield responses from those who paid commercial prices for the input. Descriptive results indicate that maize plots using commercial fertilizer obtain higher yields per kilogram of fertilizer than maize plots that used subsidized fertilizer. Conversely, the results obtained using a fixed-effects estimator indicate that when other factors are controlled for, maize plots that use subsidized fertilizer obtain a higher yield response than other plots. The results seems to be influenced by a group of farmers who used no fertilizer before the subsidy program began, but used subsidized fertilizer after the program was implemented. This group of farmers obtained significantly higher yields in the year when they receive the subsidy than did the rest of the farmers in the sample during that year. These findings indicate that in order to be effective, government officials should specifically target fertilizer subsidies to farmers who lack access to commercial markets or would not otherwise find it profitable to purchase the input.Malawi, Fertilizer Subsidies, Production Function, Crop Production/Industries,

Malawi’s Maize Marketing System

National food security in Malawi depends on improving the performance of maize markets. Ensuring that grain is consistently available at tolerable prices is crucial for consumers’ food security. At the same time, surplus producing farmers need to receive farm-gate prices consistently above production costs to intensify the use of fertilizer and other productivity enhancing technologies in a sustainable manner. These concerns give rise to the classic food price dilemma for policy makers in Malawi: how to keep prices low enough to ensure low income consumers’ access to food while keeping prices high enough to promote farm production incentives. These tensions cannot be avoided but they can be relieved through reducing food marketing margins, which shrink the wedge between producer and consumer prices. Moreover, Malawi faces major political and economic problems associated with food price instability especially given its dependence on rain fed agriculture in a region prone to drought. These issues show that improving the performance of maize markets is at the core of achieving sustainable food security and poverty reduction in Malawi.food security, Malawi, maize, marketing, food policy, Agricultural and Food Policy, Community/Rural/Urban Development, Food Security and Poverty, International Development, Marketing, q12, q18,

Estimating the Direct and Indirect Effects of Improved Seed Adoption on Yields: Evidence from DNA-Fingerprinting, Crop cuts, and Self-Reporting in Ethiopia

Farmer adoption of improved crop varieties can potentially increase yields and enhance household welfare in the developing world. However, the presence of measurement errors in household surveys poses a serious challenge to estimating the true returns to adopting improved varieties. This article analyzed the impacts of three sources of measurement error caused by farmers’ misperceptions of the varieties they planted, the area they planted, and the quantities they harvested, on maize yields and input use, using the 2018/19 Ethiopia Socio-economic Survey. These data included DNA-fingerprinting of seed, GPS plot size information, and crop cuts that we compared to farmers’ self-reported estimates of these measures. Doing so allowed us to determine the degree of measurement error in the estimates of improved maize adoption. Results indicated that the measurement error in self-reported adoption of improved maize varieties attenuated their estimated yield gains by 12 percentage points on average. Furthermore, we used the relationship between self-reported and DNA-fingerprinted adoption to disaggregate how much of the yield gains from improved seeds was due to better seed genetics and how much was due to increased effort by the farmers who planted them. We found that improved seed genetics accounted for a 22 percentage point yield increase over traditional seed, and observable effort through increased input use accounted for a 15 percentage point gain for improved varieties on average. Understanding these effects has important implications for justifying the continued funding of development of improved seed varieties and their dissemination to smallholder farmers

Measuring the Impacts of Agricultural Input Subsidies in Sub-Saharan Africa: Evidence from Malawi\u27s Farm Input Subsidy Program

Malawi, a small, land-locked country in south Eastern Africa has been at the forefront of the recent push to reestablish subsidies as a way of boosting agricultural production and improving food security, especially among the poor. Its programs have been widely observed, scrutinized, and emulated. This policy brief examines Malawi’s Farm Input Subsidy Program (FISP) and distills a set of key research findings drawn from research conducted recently at Purdue University

Household-level impacts of fertilizer subsidies in Malawi

Chapter 1 uses a double-hurdle model with panel data from Malawi to investigate how fertilizer subsidies affect farmer demand for commercial fertilizer. The paper controls for potential endogeneity caused by the non-random targeting of fertilizer subsidy recipients. Results show that on average one additional kilogram of subsidized fertilizer crowds out 0.22 kilograms of commercial fertilizer, but crowding out ranges from 0.18 among the poorest farmers to 0.30 among relatively non-poor farmers. This indicates that targeting fertilizer subsidies to the rural poor is likely to maximize the contribution of the subsidy program to total fertilizer use.Chapter 2 uses three waves of panel data in Malawi to address how fertilizer subsidies affect the agricultural labor market in Malawi. This article directly estimates how the subsidy program affects agricultural labor supply, labor demand, and median community-level wage rates, none of which have been well quantified to this point. Results from this study indicate that subsidized fertilizer has a significant negative effect on the amount of off-farm agricultural labor that recipient households supply. The average participant in the subsidy program reduces the number of days of off-farm agricultural labor supplied by 9.6% across the sample. This finding indicates that subsidy recipients may move back towards own farm production. The supply-side effect of the subsidy program is small however, as the average household that acquires subsidized fertilizer only reduces off-farm labor supply by 2.5 days on average. Therefore, the reduction in labor supply from the subsidy likely has a limited effect on household income. Fertilizer subsidies do not have a significant effect on demand for hired-in labor. This result provides some evidence that the subsidy program could have off-setting effects on the demand side, as increased demand for hired-in labor caused by boosts in production could be offset by a decrease in demand for labor as the subsidy decreases fertilizer price relative to labor price. Finally, a one kilogram increase in the average amount of subsidized fertilizer acquired per household in a community boosts median off-farm wage rate by 0.2%, but an increase of one standard deviation of subsidized fertilizer per household in a community reduces wage rate by 0.1%. This finding indicates that while greater average quantities of subsidized fertilizer in a community boost wage rates, the more unevenly that the fertilizer is distributed, the less of a positive impact it has on wage rates. The increase in median wage is mainly due to contraction of agricultural labor supply. It also provides some evidence that households who do not receive subsidized fertilizer may benefit indirectly through a slight increase in agricultural wage rates. Chapter 3 uses panel data from Malawi to measure how receiving subsidized fertilizer in the current year and in previous years affects several different measures of household well-being. Our model accounts for potential endogeneity of subsidized fertilizer due to the non-random way in which it is distributed to recipients. Results indicate that receiving subsidized fertilizer in a given year raises maize and tobacco production as well as the net value of rainy-season crop production in that year. Receipt of subsidized fertilizer over the prior three seasons also has a significant positive effect on current year maize production. However, receipt of subsidized fertilizer in the prior three consecutive years has no discernable effect on the net-value of total crop production in the current year. Moreover, we find no evidence that prior or current receipt of subsidized fertilizer contributes to off-farm or total household income. Lastly, we find no significant evidence that receiving subsidized fertilizer raises farmers' livestock and durable asset wealth. Potential general equilibrium benefits resulting from the subsidy program cannot be discounted, but the direct comparison of recipient and non-recipient households indicates that enduring effects of the subsidy beyond the year of receipt apply to maize production only and not to overall household income or asset wealth.Thesis (Ph. D.)--Michigan State University. Agricultural, Food & Resource Economics, 2011Includes bibliographical reference