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Farm size and effects of chemical fertilizer price on farm households: Insights from Nepal Terai


  • Takeshima, Hiroyuki
  • Shivakoti, Sabnam
  • Bhattarai, Binod
  • Karkee, Madhab
  • Pokhrel, Suroj
  • Kumar, Anjani


This research explores how inputs such as chemical fertilizer that are often complementary to labor can benefit smallholders in countries like Nepal. These and other inputs complement labor when a country experiences periods of increased labor scarcity due to rising wages in rural areas. The future of smallholders in Asian countries is vigorously debated in the policy and research arena. An increasing number of studies indicate that in the face of rising rural farm wages, growing mechanization is gradually shifting the advantages enjoyed by smallholders to slightly larger farms in many Asian countries, including Nepal. While the evidence is limited, earlier studies suggest that this trend may also be associated with a greater return to the use of chemical fertilizers by larger farms than by their smaller counterparts. In this paper, we further assess the relationship between the role of chemical fertilizer and farm size in lowland Nepal. In particular, we assess the different effects of chemical fertilizer price on large versus small farm households, depending on farm size. We use the 2003 and 2010 panel data from the Nepal Living Standard Survey. Results generally suggest that in Nepal Terai, lower chemical fertilizer price seems to increase the per capita incomes of farm households with larger landholdings more than it does those with smaller landholdings. The mechanism is somewhat complicated; typically, larger farms benefit through an increased supply of crops from sharecropped/rented farms, which leads to a potential increase in forage supply and increased revenues from livestock production. However, greater benefits for larger farms through this mechanism remains consistent with the greater return to chemical fertilizer among larger farms. This is contrary to the notion that chemical fertilizer is a land-saving input that benefits smaller farms relatively more than it does larger farms. We conclude that fertilizer policy in Nepal should be designed within the broader framework of longer-term agricultural-sector strategies that will impact the future of smallholder farmers.

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  • Takeshima, Hiroyuki & Shivakoti, Sabnam & Bhattarai, Binod & Karkee, Madhab & Pokhrel, Suroj & Kumar, Anjani, 2016. "Farm size and effects of chemical fertilizer price on farm households: Insights from Nepal Terai," IFPRI discussion papers 1578, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1578

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    References listed on IDEAS

    1. Hazell, Peter & Poulton, Colin & Wiggins, Steve & Dorward, Andrew, 2010. "The Future of Small Farms: Trajectories and Policy Priorities," World Development, Elsevier, vol. 38(10), pages 1349-1361, October.
    2. Shahidur Rashid & Paul A. Dorosh & Mehrab Malek & Solomon Lemma, 2013. "Modern input promotion in sub-Saharan Africa: insights from Asian green revolution," Agricultural Economics, International Association of Agricultural Economists, vol. 44(6), pages 705-721, November.
    3. Mason, Nicole M. & Wineman, Ayala & Kirimi, Lilian & Mather, David, 2016. "The Effects of Kenya’s ‘Smarter’ Input Subsidy Program on Smallholder Behavior and Incomes: Do Different Quasi-Experimental Approaches Lead to the Same Conclusions?," Food Security Collaborative Working Papers 232090, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    4. repec:taf:oxdevs:v:44:y:2016:i:1:p:93-112 is not listed on IDEAS
    5. Deininger, Klaus & Byerlee, Derek, 2012. "The Rise of Large Farms in Land Abundant Countries: Do They Have a Future?," World Development, Elsevier, vol. 40(4), pages 701-714.
    6. Yamauchi, Futoshi, 2016. "Rising real wages, mechanization and growing advantage of large farms: Evidence from Indonesia," Food Policy, Elsevier, vol. 58(C), pages 62-69.
    7. T.S. Jayne & Shahidur Rashid, 2013. "Input subsidy programs in sub-Saharan Africa: a synthesis of recent evidence," Agricultural Economics, International Association of Agricultural Economists, vol. 44(6), pages 547-562, November.
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    fertilizers; inorganic fertilizers; farm inputs; farm size; farm structure; smallholders; households;

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