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Input Subsidies, Cash Constraints, and Timing of Input Supply

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  • Stein T. Holden
  • Rodney W. Lunduka

Abstract

Is low input use by poor, smallholder farmers caused by time-inconsistent behavior or by limited ability to buy inputs? Are input subsidies the best solution to stimulate input demand or are there smarter solutions? These issues are investigated by combining survey data, stated preference questions, and randomized experiments in Malawi. The demand for fertilizer at harvest time and at planting time, farm gate shadow prices for fertilizer, and the gap between the willingness-to-accept (WTA) and willingness-to-pay (WTP) prices for a standard input package were investigated. Significant effects of timing and of cash constraints were found, suggesting the possibility that smarter designs exist, such as distribution of smaller packages from harvest time to planting time.

Suggested Citation

  • Stein T. Holden & Rodney W. Lunduka, 2014. "Input Subsidies, Cash Constraints, and Timing of Input Supply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(1), pages 290-307.
    • Handle: RePEc:oup:ajagec:v:96:y:2014:i:1:p:290-307.
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    File URL: http://hdl.handle.net/10.1093/ajae/aat059
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    Cited by:

    1. Holden, Stein, 2014. "Explaining anomalies in intertemporal choice: A mental zooming theory," CLTS Working Papers 2/14, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 10 Oct 2019.
    2. Holden, Stein T. & Bezu, Sosina, 2019. "Exchange asymmetries in productive assets: Tools, fertilizer or cash?," World Development, Elsevier, vol. 115(C), pages 269-278.
    3. Holden, Stein, 2014. "Agricultural Household Models for Malawi:Household Heterogeneity, Market Characteristics, Agricultural Productivity, Input Subsidies, and Price Shocks. A Baseline Report," CLTS Working Papers 5/14, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 10 Oct 2019.
    4. Holden, Stein T. & Westberg, Nina Bruvik, 2016. "Exploring technology use under climate risk and shocks through an experimental lens," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(1), pages 1-16, March.
    5. Ngoma, Hambulo & Mason, Nicole M. & Sitko, Nicholas, 2015. "Does Minimum Tillage with Planting Basins or Ripping Raise Maize Yields? Meso-panel Data Evidence from Zambia," Food Security Collaborative Working Papers 198701, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    6. Holden, S.T. & Quiggin, J., 2018. "Probability Weighting and Fertilizer Use in a State-Contingent Framework," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277355, International Association of Agricultural Economists.
    7. Holden , Stein T. & Quiggin, John, 2017. "Probability Weighting and Input Use Intensity in a State-Contingent Framework," CLTS Working Papers 8/17, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 21 Oct 2019.
    8. Clifton Makate & Marshall Makate, 2022. "Do Rainfall Shocks Prompt Commercial Input Purchases Amongst Smallholder Farmers in Diverse Regions and Environments in Malawi?," Sustainability, MDPI, vol. 14(22), pages 1-31, November.
    9. Estelle Koussoubé & Céline Nauges, 2017. "Returns to fertiliser use: Does it pay enough? Some new evidence from Sub-Saharan Africa," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 44(2), pages 183-210.
    10. Stein Holden & Monica Fisher, 2015. "Subsidies promote use of drought tolerant maize varieties despite variable yield performance under smallholder environments in Malawi," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 7(6), pages 1225-1238, December.
    11. Demirdogen, Alper & Olhan, Emine, 2018. "The Timing Impact of Agricultural Support Policies on Farmers’ Stated Intentions in Turkey," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 271960, European Association of Agricultural Economists.
    12. Stein T. Holden & John Quiggin, 2017. "Climate risk and state-contingent technology adoption: shocks, drought tolerance and preferences," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 44(2), pages 285-308.
    13. Asfaw, Solomon & Cattaneo, Andrea & Pallante, Giacomo & Palma, Alessandro, 2017. "Improving the efficiency targeting of Malawi's farm input subsidy programme: Big pain, small gain?," Food Policy, Elsevier, vol. 73(C), pages 104-118.
    14. Holden, Stein T., 2015. "Risk Preferences, Shocks and Technology Adoption: Farmers’ Responses to Drought Risk," CLTS Working Papers 3/15, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 11 Oct 2019.
    15. Ward, Patrick S. & Gupta, Shweta & Singh, Vartika & Ortega, David L. & Gautam, Shriniwas, 2020. "What is the intrinsic value of fertilizer? Experimental value elicitation and decomposition in the hill and terai regions of Nepal," Food Policy, Elsevier, vol. 90(C).
    16. Holden, Stein T., 2018. "The Economics of Fertilizer Subsidies," CLTS Working Papers 9/18, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 16 Oct 2019.
    17. Lunduka, R. & Kassie, G. & Tahirou, A. & Babu, S., 2018. "Do households that sell their surplus maize reinvest in improved maize seed? Case of southern Africa," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277378, International Association of Agricultural Economists.
    18. Holden , Stein T. & Quiggin, John, 2015. "Climate risk and state-contingent technology adoption: The role of risk preferences and probability weighting," Working Paper Series 15-2015, Norwegian University of Life Sciences, School of Economics and Business.
    19. Skjeflo , Sofie Waage & Holden , Stein, 2014. "Economy-wide effects of input subsidies in Malawi: Market imperfections and household heterogeneity," CLTS Working Papers 7/14, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 10 Oct 2019.

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