What are the Enduring Effects of Fertilizer Subsidy Programs on Recipient Farm Households? Evidence from Malawi

This article uses panel data from Malawi to measure how receiving subsidized fertilizer in the current year and in previous years affects several different measures of household well-being. Our model accounts for potential endogeneity of subsidized fertilizer due to the non-random way in which it is distributed to recipients. Results indicate that receiving subsidized fertilizer in a given year raises maize and tobacco production as well as the net value of rainy-season crop production in that year. Receipt of subsidized fertilizer over the prior three seasons also has a significant positive effect on current year maize production. However, receipt of subsidized fertilizer in the prior three consecutive years has no discernable effect on the net-value of total crop production in the current year. Moreover, we find no evidence that prior or current receipt of subsidized fertilizer contributes to off-farm or total household income. Lastly, we find no significant evidence that receiving subsidized fertilizer raises farmers’ livestock and durable asset wealth. Potential general equilibrium benefits resulting from the subsidy program cannot be discounted, but the direct comparison of recipient and non-recipient households indicates that enduring effects of the subsidy beyond the year of receipt apply to maize production only and not to overall household income or asset wealth