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Incomplete markets and fertilizer use : evidence from Ethiopia

Author

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  • Zerfu, Daniel
  • Larson, Donald F.

Abstract

While the economic returns to using chemical fertilizer in Africa can be large, application rates are low. This study explores whether this is due to missing and imperfect markets. Results based on a panel survey of Ethiopian farmers suggest that while fertilizer markets are not altogether missing in rural Ethiopia, high transport costs, unfavorable climate, price risk, and illiteracy present formidable hurdles to farmer participation. Moreover, the combination of factors that promote or impede effective fertilizer markets differs among locations, making it difficult to find a single production technology that is uniformly profitable -- perhaps explaining the inconsistency between field studies finding large returns to fertilizer use in Ethiopia and survey-based studies finding fertilizer use to be uneconomic. The results suggest that households with greater stores of wealth, human capital and authority can overcome these hurdles. The finding offers some encouragement, but also implies a self-enforcing link between low agricultural productivity and poverty, since low-asset households are less able to overcome these problems. The study suggests that the provision of extension services can be effective and that lowering transport costs can raise the intensity of fertilizer use by lowering the cost of fertilizer and boosting the farmgate value of output.

Suggested Citation

  • Zerfu, Daniel & Larson, Donald F., 2010. "Incomplete markets and fertilizer use : evidence from Ethiopia," Policy Research Working Paper Series 5235, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5235
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    Citations

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    Cited by:

    1. Estelle Koussoubé & Céline Nauges, 2017. "Returns to fertiliser use: Does it pay enough? Some new evidence from Sub-Saharan Africa," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 44(2), pages 183-210.
    2. Caria, A. Stefano & Tamru, Seneshaw & Bizuneh, Gera, 2011. "Food security without food transfers?: A CGE analysis for Ethiopia of the different food security impacts of fertilizer subsidies and locally sourced food transfers," IFPRI discussion papers 1106, International Food Policy Research Institute (IFPRI).
    3. Sheahan, Megan & Barrett, Christopher B., 2014. "Understanding the agricultural input landscape in Sub-Saharan Africa : recent plot, household, and community-level evidence," Policy Research Working Paper Series 7014, The World Bank.
    4. Caria, A. Stefano & Tamru, Seneshaw & Bizuneh, Gera, 2011. "Food security without food transfers?: A CGE analysis for Ethiopia of the different food security impacts of fertilizer subsidies and locally sourced food transfers," ESSP working papers 29, International Food Policy Research Institute (IFPRI).
    5. Larson,Donald F. & Muraoka,Rie & Otsuka,Keijiro, 2016. "On the central role of small farms in African rural development strategies," Policy Research Working Paper Series 7710, The World Bank.
    6. Johann, Kirsten & Mapila, Mariam & Okello, Julius J. & De, Sourovi, 2013. "Managing Agricultural Commercialization for Inclusive Growth in Sub-Saharan Africa," Working Papers 206518, University of Pretoria, Department of Agricultural Economics, Extension and Rural Development.
    7. Sheahan, Megan & Barrett, Christopher B., 2017. "Ten striking facts about agricultural input use in Sub-Saharan Africa," Food Policy, Elsevier, vol. 67(C), pages 12-25.
    8. Larson,Donald F. & Savastano,Sara & Murray,Siobhan & Palacios-Lopez,Amparo, 2015. "Are women less productive farmers ? how markets and risk affect fertilizer use, productivity, and measured gender effects in Uganda," Policy Research Working Paper Series 7241, The World Bank.
    9. repec:eee:ecolec:v:144:y:2018:i:c:p:278-291 is not listed on IDEAS
    10. Larson, Donald F. & Dinar, Ariel & Frisbie, J. Aapris, 2011. "Agriculture and the clean development mechanism," Policy Research Working Paper Series 5621, The World Bank.
    11. Muraoka, Rie & Matsumoto, Tomoya & Jin, Songqing & Otsuka, Keijiro, 2015. "On the Possibility of a Maize Green Revolution in the Highlands of Kenya: An Assessment of Emerging Intensive Farming Systems," 2015 Conference, August 9-14, 2015, Milan, Italy 212033, International Association of Agricultural Economists.
    12. Abay, Kibrom A. & Berhane, Guush & Taffesse, Alemayehu Seyoum & Koru, Bethlehem & Abay, Kibrewossen, 2016. "Understanding farmers’ technology adoption decisions: Input complementarity and heterogeneity:," ESSP working papers 82, International Food Policy Research Institute (IFPRI).

    More about this item

    Keywords

    Climate Change and Agriculture; Fertilizers; Crops&Crop Management Systems; Access to Finance; Fertilizers&Agricultural Chemicals Industry;

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