Do Fertilizer Subsidies Boost Staple Crop Production and Reduce Poverty Across the Distribution of Smallholders in Africa? Quantile Regression Results from Malawi.

This study uses three waves of nationally representative household-level panel data from Malawi to estimate how receiving an additional kilogram of subsidize fertilizer affects maize production and the value of total crop output across the distribution of smallholder farm households. We use quantile regression and a correlated random effects estimator to deal with potential endogeneity of subsidized fertilizer. We then estimate the impact of subsidizing fertilizer at the 10%, 25%, 50%, 75%, and 90% of the maize production and value of total crop output distributions. Results from this study indicate that an additional kilogram of subsidized fertilizer contributes 2.61 additional kilograms to household maize production at the 90th percentile, but just 0.75 additional kilograms to maize production at the 10th percentile. Results also indicate that an additional kilogram of subsidized fertilizer has an effect of generating an extra US $0.80 at the 90th percentile of the value of total crop output distribution, but has no statistically significant effect at the 10th percentile of the distribution. These results raise the question of whether or not fertilizer subsidies can substantially boost maize production and reduce poverty at the same time, because the major returns from the subsidy program seem to accrue to households at the top of the maize production and value of total crop output distributions. Many households at the bottom of theses distributions seem unable to generate a substantial response from the subsidized fertilizer that they acquire.