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Do input subsidy programs "crowd in" or "crowd out" commercial market development? Modeling fertilizer demand in a two-channel marketing system

Agricultural economics, 2009, Vol.40 (1), p.79-94 [Peer Reviewed Journal]

2009 International Association of Agricultural Economists ;ISSN: 0169-5150 ;EISSN: 1574-0862 ;DOI: 10.1111/j.1574-0862.2008.00361.x

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  • Title:
    Do input subsidy programs "crowd in" or "crowd out" commercial market development? Modeling fertilizer demand in a two-channel marketing system
  • Author: Xu, Zhiying ; Burke, William J ; Jayne, Thomas S ; Govereh, Jones
  • Subjects: agricultural policy ; C51 ; developing countries ; Double hurdle model ; farmers ; Fertilizer subsidies ; fertilizers ; food security ; governmental programs and projects ; Input demand ; Input marketing ; market development ; Policy ; prices ; private sector ; Q12 ; Q13 ; Q18 ; sales ; Sub-Saharan Africa ; subsidies ; Zambia
  • Is Part Of: Agricultural economics, 2009, Vol.40 (1), p.79-94
  • Description: Many governments in developing countries distribute fertilizer at subsidized prices in an effort to stimulate small farmers' agricultural productivity and food security. Prior fertilizer demand studies have largely failed to account for the effects of government programs on farmers' commercial purchases. Using a double hurdle model and nationally representative rural household panel data in Zambia, we distinguish between these sources and measure the contemporaneous "crowding in" and "crowding out" effects of government input programs on commercial fertilizer sales. Where the private sector is relatively active and average wealth is higher (areas seemingly more likely to be targeted by government programs), results indicate that subsidies have substantially crowded out the private sector, in some cases to the point that such programs could actually lower overall fertilizer use. On the other hand, in poorer areas where the private sector is relatively inactive, subsidies help to generate demand and crowd in private sector retailers. Empirical studies explicitly modeling farmers' fertilizer purchase behavior within a dual marketing framework can provide important insights for agricultural policy discussions in developing countries.
  • Publisher: Malden, USA: Blackwell Publishing Inc
  • Language: English;Dutch
  • Identifier: ISSN: 0169-5150
    EISSN: 1574-0862
    DOI: 10.1111/j.1574-0862.2008.00361.x
  • Source: Alma/SFX Local Collection
    RePEc
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