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

Authors

  • Nicole M. Mason,

  • Thomas S. Jayne

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    • Nicole Mason and Thomas S. Jayne are both with the Michigan State University, Department of Agricultural, Food, and Resource Economics, 446 W. Circle Dr., Rm. 207, East Lansing, MI 48824, USA. E-mail: masonn@msu.edu for correspondence. The authors are grateful to Mike Weber for originally highlighting the issue of leakage of subsidised fertiliser in Zambia and to Antony Chapoto for liaising with the Zambian Ministry of Agriculture and Livestock to obtain data on the quantities of subsidised fertiliser distributed annually through the Fertilizer Support Programme and Farmer Input Support Programme. We also wish to thank David Mather, Jake Ricker-Gilbert, and Bill Burke for assistance with Stata code for the hurdle model estimation, Nick Sitko, the JAE Editor, and anonymous referees for helpful feedback on the paper, and Margaret Beaver for technical assistance with the survey data used in the study. The authors acknowledge financial support from the United States Agency for International Development Mission in Zambia. Any views expressed or remaining errors are solely the responsibility of the authors.

Errata

This article is corrected by:

  1. Errata: Fertiliser subsidies and smallholder commercial fertiliser purchases: crowding out, leakage, and policy implications for Zambia Volume 65, Issue 2, 527–528, Article first published online: 8 May 2014

Abstract

Fertiliser intended for government subsidy programmes is sometimes diverted and sold to farmers at or near market prices. Failure to account for such ‘leakage’ can upwardly bias econometric estimates of the effect of government fertiliser subsidy programmes on total fertiliser use. This paper extends the framework used in earlier studies on the crowding in/crowding out effects of subsidised fertiliser on commercial fertiliser purchases to account for leakage, and then applies it to the case of Zambia. Results suggest that each additional kg of subsidised fertiliser injected into the system increases total fertiliser use by 0.54 kg. Without controlling for leakage, the estimate would have been 0.87, an overestimate of 61%.

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