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Estimating the Enduring Effects of Fertilizer Subsidies on Commercial Fertilizer Demand and Maize Production: Panel Data Evidence from Malawi

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

Abstract

Most studies of input subsidy programs confine their analysis to measuring contemporaneous program effects. This article estimates the potential longer run or enduring effects of fertilizer subsidy programs on commercial purchases of fertilizer and farmers’ maize production over time. We use four waves of panel data on 462 farm households in Malawi for whom fertilizer use can be tracked for eight consecutive seasons between 2003/04 and 2010/11. Panel estimation methods are used to control for potential endogeneity of subsidized fertilizer. Farmers acquiring subsidized fertilizer in three consecutive prior years are found to purchase slightly more commercial fertilizer in the next year. This suggests a small amount of crowding in of commercial fertilizer from the receipt of subsidized fertilizer in prior years. Acquiring subsidized fertilizer in one year has a modest positive impact on increasing maize output in the same year. However, acquiring subsidized fertilizer in prior years generates no statistically significant effect on maize output in the current year. The findings indicate that potential enduring effects of the Malawi fertilizer subsidy programs are limited. Additional interventions that increase soil fertility are needed to raise maize to fertilizer response rates. Doing so can make using inorganic fertilizer more profitable and sustainable for smallholders in sub-Saharan Africa, and increase the efficiency of input subsidy programs.

Suggested Citation

  • Ricker-Gilbert, Jacob & Jayne, T.S., 2015. "Estimating the Enduring Effects of Fertilizer Subsidies on Commercial Fertilizer Demand and Maize Production: Panel Data Evidence from Malawi," Staff Paper Series 211087, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    • Handle: RePEc:ags:midasp:211087
    DOI: 10.22004/ag.econ.211087
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    Keywords

    International Development;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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