Going the Extra Mile: Farm Subsidies and Spatial Convergence in Agricultural Input Adoption
By Shilpa Aggarwal
September 2022
September 2022
Citation
Aggarwal, Shilpa. (2022). Going the Extra Mile: Farm Subsidies and Spatial Convergence in Agricultural Input Adoption .
Copyright
2022
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Abstract
We evaluate a unique policy experiment in which the Government of Malawi ran-
domized beneficiary selection for its Farm Input Subsidy Program. We use data on
agricultural dealer location and driving directions to document that in the status quo, travel cost-adjusted prices are significantly higher in remote areas, and there exists a substantial gradient in adoption by remoteness. Since FISP subsidies can only be redeemed at these same local retailers, travel cost-adjusted prices for subsidized fertilizer are similarly higher for remote farmers. Despite these costs, redemption is only marginally lower in remote areas. The subsidy eliminates the substantial remoteness-input quantity gradient exists for non-beneficiaries. However, the equalizing effect on village-level input usage is more modest because we find that remote farmers are less likely to share subsidized inputs with non-beneficiaries.
domized beneficiary selection for its Farm Input Subsidy Program. We use data on
agricultural dealer location and driving directions to document that in the status quo, travel cost-adjusted prices are significantly higher in remote areas, and there exists a substantial gradient in adoption by remoteness. Since FISP subsidies can only be redeemed at these same local retailers, travel cost-adjusted prices for subsidized fertilizer are similarly higher for remote farmers. Despite these costs, redemption is only marginally lower in remote areas. The subsidy eliminates the substantial remoteness-input quantity gradient exists for non-beneficiaries. However, the equalizing effect on village-level input usage is more modest because we find that remote farmers are less likely to share subsidized inputs with non-beneficiaries.
Shilpa Aggarwal is an Associate Professor of Economics and Public Policy at the Indian School of Business (ISB). She is a development economist, whose research aims to explore market linkages in developing countries. For her PhD dissertation, she examined the effects of a road construction programme in India that connected remote rural areas to nearby markets. Her ongoing research is focused on agricultural supply chains in India and East Africa. She also works on issues pertaining to domestic trade, microfinance, and food policy.
Professor Aggarwal holds a PhD from the University of California, Santa Cruz, an MA from the Delhi School of Economics, and a BA from Shri Ram College of Commerce, University of Delhi.
Shilpa Aggarwal