Smart Subsidy?
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World Bank, Washington, DC
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It is often argued that subsidizing fertilizer and other inputs is desirable both to boost agricultural
production and to help poor farmers. This analysis of Malawi’s huge Farmer Input Subsidy Program
highlights a tension between these two objectives: The more FISP increases fertilizer use and thereby
raises output, the greater the distortion and hence the lower the welfare gains from the program.
Indeed, the empirical results indicate that up to 59% of every Kwacha spent on the FISP is wasted, in the
sense that the fertilizer is not sufficiently valued by the beneficiaries. Cashing out the program is shown
to have desirable distributional implications.
Palabras clave
Farmer Input Subsidy Program, FISP, agricultural productivity, poor farmers, fertilizers, income distribution