The Heterogeneous Impact of Agro-Input Subsidies on Maize...
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Introduction and Background Research Design Results The Heterogeneous Impact of Agro-Input Subsidies on Maize Production: A Field Experiment in Mozambique Rachid Laajaj 1 1 University of Wisconsin Madison Paris School of Economics NAIVASHA - APRIL 2012 Rachid Laajaj Heterogeneous Impact of Subsidies
Transcript of The Heterogeneous Impact of Agro-Input Subsidies on Maize...
Introduction and Background
Research Design
Results
The Heterogeneous Impact of Agro-Input Subsidies on Maize
Production:
A Field Experiment in Mozambique
Rachid Laajaj1
1University of Wisconsin MadisonParis School of Economics
NAIVASHA - APRIL 2012
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Background
MOTIVATION
Sub-Saharan Africa, not self-sufficient and had the slowestincrease in yield from 1960 to 2000In 2009, Farmers in Africa used 13 kg/ha of fertilizercompared 94 kg/ha among developing countriesSome evidence of high returns (Duflo et al. 2008, Hassan1998), but still a debate (Foster and Rosenzweig 2010)How to increase productivity and technology adoption? AreAgro-input subsidies a good solution?
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Background
TRADITIONAL vs MARKET SMART SUBSIDIES
Traditional Subsidies70’s and 80’sState-owned enterprise: undermined private sectorCostly and inefficient: benefits the richRemoved during structural adjustments in the 90’s
Smart SubsidiesDistributes vouchers to targeted beneficiariesGenerates a demand that stimulates private sectorCombines poverty reduction and self sufficiency
Are Smart subsidies the magic bullet?
Rachid Laajaj Heterogeneous Impact of Subsidies
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Research Design
Results
Background
IS MALAWI A SUCCESS STORY?
1998 Starter Pack Scheme - 2000 Target Input program - 2005FISPSmart subsidies for fertilizer, targeting mostly maize andtobacco producersIncrease in fertilizer use and production -> Self-sufficiency
But also faces many critics:Causal impact difficult to identify and measure (correlates withgood weather)Costly: 16% of national budget and 74% of agriculturalbudget: Viability? (Dorward and Chirwa, 2011)Leakages in targeting the poor or most vulnerable (Chibwanaet al. 2010)Low effectiveness (Minot and Benson, 2009)Reduced diversification Increased vulnerability of beneficiaries(Levy 2003)
Rachid Laajaj Heterogeneous Impact of Subsidies
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Research Design
Results
Background
MOZAMBIQUE
Mozambique:Independence in 1975, Civil war 1977 to 19928% annual GDP growth since 1994, Human DevelopmentIndex 184th out of 187 countries ratedAgricultural production grew by 6% -> decrease in ruralpoverty from 69% to 54%Mostly increase in area cultivated and labor, yield stagnant
Evaluation in in Manica Province, Center West ofMozambique, border with Zimbabwe
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
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The Intervention
Research Strategy
THE VOUCHER PROGRAM
Voucher program funded by European Union, implemented byMozambican government, FAO, and IFDC2 year program 2009-2010 and 2010-2011, 25,000 vouchers ofmaize and rice in 5 provincesEvaluation focuses in Maize vouchers in the province ofManica, in the 2nd year1 voucher = 73% subsidy on package of 12.5 kg of improvedseeds (either OPV or hybrid), and 100kg of fertilizerMarket price of package = MZN 3,163 or about USD 117Survey of 1,593 households in “baseline” and 1,436 in firstfollow-up survey (9.9% attrition exogenous to treatment)
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
SELECTION CRITERIA & RANDOMIZATION
Selection of farmers based on 5 criteria:Small scale farmer: Between 0.5 hectare and 5 hectares ofmaize“Progressive farmer”, aiming for a modernizationAccess to the extension and input and output marketsAbility and willingness to pay for the remaining 27% of thecost of the package
Lists and distribution made by government agriculturalextension, under the supervision of IFDCParticipants informed that half will be selectedRandomization: within each village, 50% of participantsgained the right to receive a voucher
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
Why Was a Randomization Necessary?
Compared to Lab Experiments:Returns to inputs usually higher due to better conditions in alabDo farmers know how to apply it?What is the proportion of vouchers that are used? by whom?What is the impact on the well-being of the beneficiaries(nutrition, etc)
Non-randomized evaluation of a voucher subsidy program:Self-selection of the farmers who receive the voucher: can bemore productive even without using the voucher
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
QUESTIONS ADDRESSED
To what extent did the subsidy translate into an increase inthe use of improved seeds and fertilizer?How did the increased use of input translate into an increase inproduction?Heterogenous impact of the subsidy:
Are some households more likely to use the subsidy thanothers? Who?Are the returns to the use of input heterogenous? Who hashigher returns?
Implications for different objectives:Self-sufficiencyPoverty reductionTechnology adoption
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
The Intervention
Research Strategy
CAUSAL CHAIN
Rachid Laajaj Heterogeneous Impact of Subsidies
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Research Design
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Average Impacts
USE OF INPUTS
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
USE OF INPUTS
Winning the lottery increased the probability of USING thepackage from maize production from 6% to 28%Reasons for substantial leakages:
Lack of money to complete the subsidy? (credit constraint orwillingness to pay?)Late distribution of vouchers and availability of inputsAlternative uses of fertilizer: Other crops, sold?
Rachid Laajaj Heterogeneous Impact of Subsidies
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Average Impacts
AVERAGE IMPACT ON PRODUCTION
Rachid Laajaj Heterogeneous Impact of Subsidies
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Average Impacts
ANALYSIS OF HETEROGENEITY
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
CONCLUSIONS FROM NON-PARAMETRIC ANALYSIS
Very high heterogeneity of returns among farmersHigher benefits concentrated among most productive farmers97% of farmers had positive returns at subsidized priceOnly 25% of farmers have positive returns at market priceAmong these ones average return is 117%Can we tell more about who benefit the most?
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
ADDITIONAL FINDINGS
The returns are much higher in irrigated parcelsNumber of years of experience using fertilizer also increase thereturn of using the voucherDifference of impact of the subsidy caused by 2 reasons:
Higher return to fertilizer for experienced farmers and irrigatedplotsThese farmers are also much more likely to use the voucher
Rachid Laajaj Heterogeneous Impact of Subsidies
Introduction and Background
Research Design
Results
Average Impacts
CONCLUSIONS
Did the subsidy contribute to its objectives?Significant increase in production: improvement inSelf-sufficiencyReturn to the package relatively high among small scalefarmers93% benefited from it: contributed to poverty reduction butinefficientlybecause of leakagesMost experimented farmers more likely to use it, and get morereturns: limits the scope for impact technology adoptionNeed broader policy that takes into account complementaritiesand know-how
Rachid Laajaj Heterogeneous Impact of Subsidies
