This book takes forward our understanding of agricultural input subsidies in low income countries.

This is an open access title available under the terms of a CC BY-NC-ND 3.0 International licence. It is free to read at Oxford Scholarship Online and offered as a free PDF download from OUP and selected open access locations. Agricultural input subsidies have been adopted on a large scale across different African countries in the last few years. However global experience with input subsidies has been mixed, and there is considerable concern that current input subsidies will turn out to be expensive political programmes with very limited development benefits. There is, however, also considerable enthusiasm for new, 'smart' approaches in subsidies' delivery and for their potential to raise the productivity of millions of poor smallholder farmers and lift them out of poverty while promoting wider food security. This book takes forward our understanding of agricultural input subsidies in low income countries. A review and extension of current thinking on the potential roles of such subsidies provides the basis for a broad examination of recent documented experience in different African countries and then for: a detailed examination of Malawi's current agricultural input subsidy programme, the main focus of the book. This large programme has been the subject a very considerable international debate, much of it unfortunately little informed by the substantial amount of information available on the programme. Drawing on their extensive involvement with the programme over many years and on a wide range of information sources, the authors provide a detailed analysis of the historical, political and agro-economic roots and context of the programme, and its implementation and impacts from 2005 to 2011. Of interest in its own right, this also provides critical insights into the potential benefits and risks with such programmes, and on political and technical issues that are critical in success or failure,.

Many countries subsidize agricultural inputs but require farmers to travel to retailers to access inputs, just as for normal purchases. What effect do travel costs have on subsidy take-up and input usage, particularly for remote farmers? We analyze Malawi's Farm Input Subsidy Program (FISP), and show that travel-cost-adjusted prices are substantially higher in remote areas. However, subsidy redemption is nearly universal. We make use of a policy change in 2017-19 which took centralized control of beneficiary selection and find that FISP eliminates the sizeable remoteness gradient that exists for non-beneficiaries. Our results demonstrate that subsidy programs may narrow spatial inequities.

Despite improvements to the implementation regime of Ghana’s fertilizer subsidy program, this paper shows that considerable challenges remain in ensuring that the subsidy is targeted to farmers who need fertilizer the most. Currently, larger-scale and wealthier farmers are the main beneficiaries of subsidized fertilizer even though the stated goal is to target smallholder farmers with fertilizer subsidies. The experience of other African countries suggests that the effectiveness of fertilizer subsidies can improve with effective targeting of resource-poor smallholders. However, targeting smallholder farmers entails significant transaction costs and may even be infeasible in some cases. Faced with such challenges, Ghanaian policy makers must ponder the question of how to improve the targeting of input subsidy programs in the country. Further research is needed to identify more cost-effective approaches for achieving the goal of targeting.

Agricultural input subsidies have been adopted on a large scale across different African countries in the last few years. However global experience with input subsidies has been mixed, and there is considerable concern that current input subsidies will turn out to be expensive political programmes with very limited development benefits. There is, however, also considerable enthusiasm for new, "smart" approaches in subsidies' delivery and for their potential to raise the productivity of millions of poor smallholder farmers and lift them out of poverty while promoting wider food security. This book takes forward our understanding of agricultural input subsidies in low income countries. A review and extension of current thinking on the potential roles of such subsidies provides the basis for a broad examination of recent documented experience in different African countries and then for: a detailed examination of Malawi's current agricultural input subsidy programme, the main focus of the book. This large programme has been the subject a very considerable international debate, much of it unfortunately little informed by the substantial amount of information available on the programme. Drawing on their extensive involvement with the programme over many years and on a wide range of information sources, the authors provide a detailed analysis of the historical, political and agro-economic roots and context of the programme, and its implementation and impacts from 2005 to 2011. Of interest in its own right, this also provides critical insights into the potential benefits and risks with such programmes, and on political and technical issues that are critical in success or failure.

The agriculture sector receives substantial fiscal subsidies in various forms, including through programs that are linked to production and others that are decoupled. As the sector has reached the technology frontier in production over the last three decades or so, particularly in high- and middle-income countries, it is intriguing to investigate the impact of subsidies on productivity at aggregate level. This study examines the impact of subsidies on productivity growth in agriculture globally using a long time series on the nominal rate of assistance for 42 countries that covers over 80 percent of agricultural production. The econometric results show heterogenous effects from various subsidy instruments depending on the choice of productivity measure. Regression results suggest a strong positive effect of input subsidies on both output growth and labor productivity. A positive but relatively small impact of output subsidies is found on output growth only. Subsidies that are mostly decoupled reveal no significant impact on any of the productivity measures.