Targeting of Beneficiaries in Chemical Fertilizer Subsidy Programs: State of Knowledge and Evidence Gaps

Low- and middle-income countries are under increasing fiscal pressure to rationalize spending on fertilizer subsidy programs. Policy reforms shifting expenditure away from subsidies can have beneficial impacts given the well-documented distortionary market effects and negative environmental externalities of fertilizer subsidies. However, such reforms also result in losses and often lower fertilizer use for current beneficiaries. Understanding who is impacted by reform thus requires an assessment of who is currently benefiting, yet there is little systematic work understanding who these programs currently benefit both on paper and in practice. In this paper, we identify low- and middle- income countries with active fertilizer subsidy programs, and characterize the targeting regime of each program based on both explicit and implicit criteria determining eligibility. Then in a selection of case studies, we explore which individuals are receiving subsidy benefits in practice. We find that while many fertilizer subsidy programs are designed as universal, in many countries there are implicit targeting criteria embedded in the way subsidy programs are implemented and/or informal targeting induced by supply shortfalls. Further, we find evidence that regardless of targeting regime, the incidence of fertilizer subsidies is generally progressive, driven by the fact that the poor are often concentrated in the agricultural sector.