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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 E.
  • 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 E. & 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 Annual Meeting, August 4-6, 2013, Washington, D.C. 149259, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:149259
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jfpoli:v:69:y:2017:i:c:p:190-206 is not listed on IDEAS
    2. Saenz, Mariana & Thompson, Eric, 2017. "Gender and Policy Roles in Farm Household Diversification in Zambia," World Development, Elsevier, vol. 89(C), pages 152-169.
    3. repec:eee:wdevel:v:97:y:2017:i:c:p:251-265 is not listed on IDEAS
    4. Channing Arndt & Karl Pauw & James Thurlow, 2016. "The Economy-wide Impacts and Risks of Malawi's Farm Input Subsidy Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 962-980.
    5. Larson,Donald F. & Muraoka,Rie & Otsuka,Keijiro, 2016. "On the central role of small farms in African rural development strategies," Policy Research Working Paper Series 7710, The World Bank.
    6. Shilpa Aggarwal & Eilin Francis & Jonathan Robinson, 2018. "Grain Today, Gain Tomorrow: Evidence from a Storage Experiment with Savings Clubs in Kenya," NBER Working Papers 24391, National Bureau of Economic Research, Inc.
    7. Pauw, Karl & Beck, Ulrik & Mussa, Richard, 2014. "Did rapid smallholder-led agricultural growth fail to reduce rural poverty? Making sense of Malawi's poverty puzzle," WIDER Working Paper Series 123, World Institute for Development Economic Research (UNU-WIDER).
    8. repec:bla:jageco:v:68:y:2017:i:1:p:45-69 is not listed on IDEAS
    9. Mason, Nicole M. & Tembo, Solomon T., 2014. "Do input subsidies reduce poverty among smallholder farm households? Evidence from Zambia," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170617, Agricultural and Applied Economics Association.
    10. Takeshima, Hiroyuki & Liverpool-Tasie, Lenis Saweda O., 2015. "Fertilizer subsidies, political influence and local food prices in sub-Saharan Africa: Evidence from Nigeria," Food Policy, Elsevier, vol. 54(C), pages 11-24.
    11. Mason, Nicole M. & Tembo, Solomon T., 2015. "Do Input Subsidy Programs Raise Incomes and Reduce Poverty among Smallholder Farm Households? Evidence from Zambia," Food Security Collaborative Working Papers 198702, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    12. Fink, Günther & Jack, Kelsey & Masiye, Felix, 2014. "Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia," IZA Discussion Papers 8657, Institute for the Study of Labor (IZA).
    13. Arndt, Channing & Pauw, Karl & Thurlow, James, 2014. "The economywide impacts and risks of Malawi.s farm input subsidy programme," WIDER Working Paper Series 099, World Institute for Development Economic Research (UNU-WIDER).
    14. Mussa, Richard, 2017. "Long-term Effects of Early Life Maize Yield on Maize Productivity and Efficiency in Rural Malawi," MPRA Paper 75975, University Library of Munich, Germany.
    15. 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.
    16. Sibande, Lonester & Bailey, Alastair & Davidova, Sophia, 2015. "The impact of farm input subsidies on household welfare in Malawi," 2015 Conference, August 9-14, 2015, Milan, Italy 212830, International Association of Agricultural Economists.
    17. Sibande, Lonester & Bailey, Alastair & Davidova, Sophia, 2017. "The impact of farm input subsidies on maize marketing in Malawi," Food Policy, Elsevier, vol. 69(C), pages 190-206.

    More about this item

    Keywords

    Input subsidies; maize prices; Malawi; Zambia; sub-Saharan Africa; Demand and Price Analysis; Food Security and Poverty; International Development; Production Economics; E65; G38; O13; O20; Q18;

    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

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