Modeling the Effects of Input Market Reforms on Fertilizer Demand and Maize Production: A Case Study of Kenya

Kenya is one of the few countries in sub-Saharan Africa experiencing an impressive rise in fertilizer use on food crops grown by smallholder farmers since the liberalization of input markets starting in the early-1990s. The impacts of these reforms and associated private sector investments on national fertilizer use and food production have never been rigorously quantified, though doing so could shed new light on policy makers’ options for raising food crop productivity in the region. This study estimates a double-hurdle model of fertilizer demand that controls for common forms of unobserved heterogeneity then simulates the effect of changes in fertilizer prices and distances from farm to the nearest fertilizer retailer associated with fertilizer market liberalization on the demand for fertilizer and the production of maize, the major staple crop in the country. The study concludes that over the period 1997-2010 the reduction in real fertilizer prices associated with input market liberalization is estimated to have raised maize yields by 15 to 100 kg/ha, depending on the province and year. Low average physical response rates of maize to fertilizer application in high fertilizer consuming areas of Kenya limits the degree to which increased fertilizer use via liberalization policies translates into food production improvements. These increases in maize yield specifically linked to changes in fertilizer prices accounted for between 1 and 11 percent of changes in maize production between survey years.