The phantom menace in agriculture: How lagged droughts distort input decisions and create environmental deadweight loss

Excessive chemical fertilizer use damages ecosystems and human health globally. This study identifies a significant and novel correlate of fertilizer overuse: farmers’ responses to lagged droughts. Employing unique plot-level data from maize production in China, we find that while drought shocks in any given year are independent, a drought in the previous year increases fertilizer use in the current year by 17.6%, with no positive effect on yield. A simple extrapolation suggests this behavioral response could account for an annual total fertilizer overuse of 1.15 million tons in China, translating to a monetary cost of 509 million USD, water pollution affecting 2–7 billion m3, and carbon emissions of 9.3 million tons. While we cannot distinguish whether the fertilizer overuse is due to behavioral bias or a response to potentially lower soil nitrogen availability following a drought, the finding that the increased fertilizer use provides no yield benefit, combined with the projected increase in drought frequency under climate change, underscores the urgent need for mitigation. We identify investment in irrigation, land consolidation toward high-productivity farmers, and the promotion of drought-tolerant crop varieties as key approaches to addressing this complex issue, whether its root cause is behavioral bias or agronomic necessity.