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What are the effects of input subsidy programs on equilibrium maize prices? Evidence from Malawi and Zambia

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  • Ricker-Gilbert, Jacob
  • Mason, Nicole M.
  • Jayne, Thomas S.
  • Darko, Francis Addeah
  • Tembo, Solomon

Abstract

An important hypothesized benefit of large-scale input subsidy programs in Africa is that by raising maize production, the subsidies should put downward pressure on retail maize prices to the benefit of urban consumers and the rural poor who tend to be net food buyers. To inform debates related to this rationale for input subsidies, this study estimates the effects of fertilizer subsidies on retail maize prices in Malawi and Zambia using market or district-level panel data covering the 2000/01 to 2011/12 maize marketing years. Results indicate that roughly doubling the size of Malawi’s subsidy program (i.e., increasing the amount of subsidized fertilizer distributed to each district by 4,000 metric tons per year) reduces maize prices by 1.2% to 1.6% on average. In Zambia, roughly doubling the scale of the country’s subsidy program (i.e., increasing the amount of subsidized fertilizer distributed to each district by 1,000 metric tons per year) reduces maize prices by 1.8% to 2.4% on average. The results are robust across countries and model specifications, and indicate that the fertilizer subsidy programs in Malawi and Zambia have had a minimal effect on reducing retail maize prices.

Suggested Citation

  • Ricker-Gilbert, Jacob & Mason, Nicole M. & Jayne, Thomas S. & Darko, Francis Addeah & Tembo, Solomon, 2013. "What are the effects of input subsidy programs on equilibrium maize prices? Evidence from Malawi and Zambia," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161264, African Association of Agricultural Economists (AAAE).
    • Handle: RePEc:ags:aaae13:161264
    DOI: 10.22004/ag.econ.161264
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    References listed on IDEAS

    as
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    Keywords

    Agricultural and Food Policy; Demand and Price Analysis;

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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