Agricultural Productivity and Deforestation: Evidence from Input Subsidies and Ethnic Favoritism in Malawi

Abstract

This paper studies the underlying relationship between agricultural productivity and deforestation by analyzing the impacts of a large fertilizer and seed subsidy program in Malawi. In the absence of well-defined subsidy eligibility criteria, we demonstrate that areas with a high proportion of individuals of the same ethnicity as the president received more subsidized fertilizer and deforested less compared to areas with other predominant ethnicities. We provide evidence that subsidized fertilizer increased yields and reduced pressure to expand agriculture and that the findings are not confounded by increases in public sector employment or other public assistance programs. The results suggest that policies aimed at increasing small-scale agricultural productivity may have positive environmental spillovers.