Fit for (re)purpose ? A New Look at the Spatial Distribution of AgriculturalSubsidies

Agricultural subsidies make up a large share of public budgets, exceeding 40 percent of totalagricultural production value in some countries. Subsidies are often important components of government strategies toraise agricultural productivity, support agricultural households, and promote food security. They do so byreducing production costs, promoting the use of inputs or modern farming techniques, encouraging the production ofcertain crops, and raising household incomes. Given the magnitude of these subsidies, their distributionalimplications and the externalities they impose on the environment are of significant consequence. This paper usesa new spatial analysis to explore the distributional implications of agricultural output subsidies across 16countries/regions and the distributional and select environmental implications of input subsidies across 23countries/regions. The findings show that, relative to the spatial distribution of income, both types of subsidy aredistributionally mixed. Output subsidies are relatively progressive in 10 countries/regions and regressive in six,while input subsidies are relatively progressive in 11 countries/regions, regressive in nine, and neutral in three.The results also show that input subsidy schemes significantly increase fertilizer use, particularly inricher regions within countries, leading to soil saturation of nitrogen, an indicator of accelerated environmental degradation.