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Fertilizer Subsidies and Smallholder Commercial Fertilizer Purchases: Crowding Out, Leakage, and Policy Implications for Zambia

  • Mason, Nicole M.
  • Jayne, Thomas S.

Targeted fertilizer subsidies are growing in popularity in Sub-Saharan Africa and are a pillar of the Government of the Republic of Zambia’s (GRZ’s) agricultural sector strategy. For example, over the 2004 to 2011 fiscal years, the budget allocation to the Fertilizer Support Programme (FSP) and its successor, the Farmer Input Support Programme (FISP), averaged 40% of the total allocation to the ministries responsible for agriculture, livestock, and fisheries, and 64% of the total budget for agricultural sector poverty reduction programs. However, if subsidized fertilizer is allocated to households that would have otherwise purchased it at commercial prices, then the increase in total fertilizer use as a result of the subsidy program will be negligible. In other words, the change in total fertilizer use depends in part on the extent to which subsidized fertilizer crowds out or displaces commercial fertilizer purchases.

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File URL: http://purl.umn.edu/146928
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Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Food Security Collaborative Working Papers with number 146928.

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Date of creation: Dec 2012
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Handle: RePEc:ags:midcwp:146928
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  1. Sitko, Nicholas J. & Bwalya, Richard & Kamwanga, Jolly & Wamulume, Mukata, 2012. "Assessing the Feasibility of Implementing the Farmer Input Support Programme (FISP) Through an Electronic Voucher System in Zambia," Food Security Collaborative Policy Briefs 123210, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  2. Vella, Francis, 1993. "A Simple Estimator for Simultaneous Models with Censored Endogenous Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 441-57, May.
  3. Zhiying Xu & William J. Burke & Thomas S. Jayne & Jones Govereh, 2009. "Do input subsidy programs "crowd in" or "crowd out" commercial market development? Modeling fertilizer demand in a two-channel marketing system," Agricultural Economics, International Association of Agricultural Economists, vol. 40(1), pages 79-94, 01.
  4. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  5. Banful, Afua B. & Nkonya, Ephraim & Oboh, Victor, 2010. "Constraints to fertilizer use in Nigeria," IFPRI discussion papers 1010, International Food Policy Research Institute (IFPRI).
  6. 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.
  7. Stein Holden & Rodney Lunduka, 2012. "Do fertilizer subsidies crowd out organic manures? The case of Malawi," Agricultural Economics, International Association of Agricultural Economists, vol. 43(3), pages 303-314, 05.
  8. Banful, Afua Branoah, 2011. "Old Problems in the New Solutions? Politically Motivated Allocation of Program Benefits and the "New" Fertilizer Subsidies," World Development, Elsevier, vol. 39(7), pages 1166-1176, July.
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