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

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

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.

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File URL: http://purl.umn.edu/149259
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Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149259.

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Date of creation: 2013
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Handle: RePEc:ags:aaea13:149259
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  1. Ravallion, Martin, 2000. "Prices, wages and poverty in rural India: what lessons do the time series data hold for policy?," Food Policy, Elsevier, vol. 25(3), pages 351-364, June.
  2. Ricker-Gilbert, Jacob & Jayne, Thomas S., 2011. "What are the Enduring Effects of Fertilizer Subsidy Programs on Recipient Farm Households? Evidence from Malawi," Staff Papers 109593, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  3. Emílio Tost�o & B. Wade Brorsen, 2005. "Spatial price efficiency in Mozambique's post-reform maize markets," Agricultural Economics, International Association of Agricultural Economists, vol. 33(2), pages 205-214, 09.
  4. Mason, Nicole M. & Myers, Robert J., 2011. "The Effects of the Food Reserve Agency on Maize Market Prices in Zambia," Food Security Collaborative Policy Briefs 120766, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  5. Shahidur Rashid, 2004. "Spatial Integration of Maize Markets in Post-liberalised Uganda," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 13(1), pages 102-133, March.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Mason, Nicole M. & Jayne, Thomas S. & Myers, Robert J., 2012. "Smallholder Behavioral Responses to Marketing Board Activities in a Dual Channel Marketing System: The Case of Maize in Zambia," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126927, International Association of Agricultural Economists.
  8. Mason, Nicole M. & Burke, William J. & Shipekesa, Arthur M. & Jayne, Thomas S., 2011. "The 2011 Surplus in Smallholder Maize Production in Zambia: Drivers, Beneficiaries, & Implications for Agricultural & Poverty Reduction Policies," Food Security Collaborative Working Papers 118477, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  9. Nkonde, Chewe & Mason, Nicole M. & Sitko, Nicholas J. & Jayne, Thomas S., 2011. "Who Gained and Who Lost from Zambia's 2010 Maize Marketing Policies?," Food Security Collaborative Working Papers 99610, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  10. Burke, William J. & Jayne, Thomas S. & Chapoto, Antony, 2010. "Factors Contributing to Zambia's 2010 Maize Bumper Harvest," Food Security Collaborative Working Papers 97036, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  11. Jacob Ricker-Gilbert & Thomas S. Jayne & Ephraim Chirwa, 2010. "Subsidies and Crowding Out: A Double-Hurdle Model of Fertilizer Demand in Malawi," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 26-42.
  12. Goletti, Francesco & Babu, Suresh, 1994. "Market liberalization and integration of maize markets in Malawi," Agricultural Economics, Blackwell, vol. 11(2-3), pages 311-324, December.
  13. Van Campenhout, Bjorn, 2007. "Modelling trends in food market integration: Method and an application to Tanzanian maize markets," Food Policy, Elsevier, vol. 32(1), pages 112-127, February.
  14. Robert J. Myers & T.S. Jayne, 2012. "Multiple-Regime Spatial Price Transmission with an Application to Maize Markets in Southern Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 174-188.
  15. Chapoto, Antony, 2012. "The Political Economy of Food Price Policy: The Case of Zambia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  16. Jayne, Thomas S. & Sitko, Nicholas J. & Ricker-Gilbert, Jacob & Mangisoni, Julius H., 2010. "Malawi’s Maize Marketing System," Food Security Collaborative Working Papers 62162, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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