Should Farm Input Subsidy Programs Target Poor or Non-Poor Farmers? Evidence from Malawi’s Farm Input Subsidy Program
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Washington, DC: World Bank
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This paper addresses the question of
whether farm input subsidy programs should be targeted at
non-poor farmers instead of poor farmers, using a two-wave,
nationally representative panel data from Malawi. The
question is addressed by estimating the net gain in maize
yield for targeting non-poor farmers instead of poor farmers
after accounting for the difference in inorganic fertilizer
use efficiency and the difference in crowding-out of
commercial fertilizer by subsidized fertilizer between the
poor and non-poor farmers. Consumption expenditure is used
to classify households into consumption poor and non-poor
households, and an asset-based wealth index is used to
classify households into asset poor and non-poor households.
The difference in inorganic fertilizer use efficiency is
estimated with a multilevel model of maize yield, and the
difference in crowding out is estimated with a double hurdle
model of demand for commercial, inorganic fertilizer. The
results indicate that non-poor farmers are significantly
more efficient in the use of inorganic fertilizer but have
significantly higher levels of crowding out, compared to
poor farmers. This suggests that there is a trade-off
between targeting non-poor farmers and targeting poor
farmers. However, further analysis of the trade-off
indicates that targeting non-poor farmers instead of poor
farmers, even after accounting for the difference in
crowding out, would result in an overall gain in yield of
3.14 to 4.33 kilograms of maize per kilogram of nitrogen
distributed by the subsidy program. Therefore, the
productivity enhancing objective of Malawi’s farm input
subsidy program would be better served by targeting non-poor
farmers instead of poor farmers.
Palabras clave
TARGETING, FERTILIZER SUBSIDY, POOR FARMERS, PRODUCTIVE FARMERS, MALAWI