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What are the Dynamic Effects of Fertilizer Subsidies on Household Well‐being? Evidence from Malawi

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

Abstract

This study uses household level panel data from Malawi to measure the contemporaneous and dynamic impacts of fertilizer subsidies on different indicators of household well‐being. Well‐being is measured in this paper using indicators contained in available survey data, such as area cultivated, maize production, asset wealth, respondent‐stated adequacy of food consumption and respondent-stated life satisfaction. The study uses fixed effects and instrumental variable methods to control for endogeneity caused by the non‐random distribution of targeted fertilizer subsidies. Results indicate that the quantity of subsidized fertilizer acquired by a household has a positive contemporaneous effect on area planted, area planted to maize and maize production at the household level. The subsidy also has a significant dynamic effect on the quantity of maize that households produce. Subsidized fertilizer has no significant contemporaneous or dynamic effect on household asset accumulation. Receiving more subsidized fertilizer does not make households feel that their food consumption has been adequate over the past year, but receiving more subsidized fertilizer makes household heads say that they are more satisfied with their lives. Subsidized fertilizer appears to be going to people with more land. In addition, people in villages where members of parliament reside also receive greater quantities of subsidized fertilizer. These findings raise questions about how subsidy recipients are targeted. Improving targeting could increase the positive impacts of fertilizer subsidies on household well‐being.

Suggested Citation

  • Ricker-Gilbert, Jacob & Jayne, Thomas S., 2010. "What are the Dynamic Effects of Fertilizer Subsidies on Household Well‐being? Evidence from Malawi," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96650, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
  • Handle: RePEc:ags:aaae10:96650
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    References listed on IDEAS

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    1. Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
    2. Zhiying Xu & Zhengfei Guan & T.S. Jayne & Roy Black, 2009. "Factors influencing the profitability of fertilizer use on maize in Zambia," Agricultural Economics, International Association of Agricultural Economists, vol. 40(4), pages 437-446, July.
    3. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    4. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
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    Keywords

    Food Security and Poverty;

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