Variable Returns to Fertiliser Use and the Geography of Poverty: Experimental and Simulation Evidence from Malawi

We use large-scale, panel experimental data from maize field trials throughout Malawi to estimate the expected biophysical returns to fertiliser use conditional on a range of agronomic factors and weather conditions. Using these estimated returns and historical price and weather data, we simulate the expected profitability of fertiliser application over space and time. We find that the fertiliser bundles distributed under Malawi's subsidy programme are almost always profitable for improved hybrid seeds at retail and farmer-reported maize and fertiliser prices. Our results on the profitability of fertiliser under Malawi's subsidy programme are robust to a tripling of fertiliser prices, to a 50% decrease in the maize price and to drought conditions. We also correlate the estimated expected returns to fertiliser use with geographically disaggregated estimates of headcount poverty rates. We find a very weak positive correlation between poverty and the expected returns to fertiliser, which calls into question whether fertiliser subsidies are spatially distributionally progressive in helping to reduce poverty among Malawian farmers.