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Do Fertilizer Subsidies Boost Staple Crop Production and Reduce Poverty Across the Distribution of Smallholders in Africa? Quantile Regression Results from Malawi

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  • Ricker-Gilbert, Jacob
  • Jayne, Thomas S.

Abstract

This study uses three waves of nationally representative household-level panel data from Malawi to estimate how receiving an additional kilogram of subsidize fertilizer affects maize production and the value of total crop output across the distribution of smallholder farm households. We use quantile regression and a correlated random effects estimator to deal with potential endogeneity of subsidized fertilizer. We then estimate the impact of subsidizing fertilizer at the 10%, 25%, 50%, 75%, and 90% of the maize production and value of total crop output distributions. Results from this study indicate that an additional kilogram of subsidized fertilizer contributes 2.61 additional kilograms to household maize production at the 90th percentile, but just 0.75 additional kilograms to maize production at the 10th percentile. Results also indicate that an additional kilogram of subsidized fertilizer has an effect of generating an extra US $0.80 at the 90th percentile of the value of total crop output distribution, but has no statistically significant effect at the 10th percentile of the distribution. These results raise the question of whether or not fertilizer subsidies can substantially boost maize production and reduce poverty at the same time, because the major returns from the subsidy program seem to accrue to households at the top of the maize production and value of total crop output distributions. Many households at the bottom of theses distributions seem unable to generate a substantial response from the subsidized fertilizer that they acquire.

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Bibliographic Info

Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 126742.

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Date of creation: 29 Jun 2012
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Handle: RePEc:ags:iaae12:126742

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Keywords: Productivity Analysis;

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  1. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
  2. Esther Duflo & Michael Kremer & Jonathan Robinson, 2008. "How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya," American Economic Review, American Economic Association, vol. 98(2), pages 482-88, May.
  3. Jacob Ricker-Gilbert & Thomas S. Jayne & Ephraim Chirwa, 2010. "Subsidies and Crowding Out: A Double-Hurdle Model of Fertilizer Demand in Malawi," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 26-42.
  4. Tavneet Suri, 2011. "Selection and Comparative Advantage in Technology Adoption," Econometrica, Econometric Society, vol. 79(1), pages 159-209, 01.
  5. Abrevaya, Jason & Dahl, Christian M, 2008. "The Effects of Birth Inputs on Birthweight," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 379-397.
  6. Paswel P. Marenya & Christopher B. Barrett, 2009. "State-conditional Fertilizer Yield Response on Western Kenyan Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 991-1006.
  7. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  8. Gamper-Rabindran, Shanti & Khan, Shakeeb & Timmins, Christopher, 2010. "The impact of piped water provision on infant mortality in Brazil: A quantile panel data approach," Journal of Development Economics, Elsevier, vol. 92(2), pages 188-200, July.
  9. Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-90, October.
  10. Banful, Afua Branoah, 2011. "Old Problems in the New Solutions? Politically Motivated Allocation of Program Benefits and the "New" Fertilizer Subsidies," World Development, Elsevier, vol. 39(7), pages 1166-1176, July.
  11. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  12. Chibwana, Christopher & Fisher, Monica & Shively, Gerald, 2012. "Cropland Allocation Effects of Agricultural Input Subsidies in Malawi," World Development, Elsevier, vol. 40(1), pages 124-133.
  13. Ricker-Gilbert, Jacob & Jayne, Thomas S., 2011. "What are the Enduring Effects of Fertilizer Subsidy Programs on Recipient Farm Households? Evidence from Malawi," Staff Papers 109593, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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