Crowding out, diversion, and benefit/cost assessments in fertilizer subsidy programs in sub‐Saharan Africa: a comment on Jayne, T.S., Mather, D., Mason, N., Ricker‐Gilbert, J., 2013. How do fertilizer subsidy programs affect total fertilizer use in sub‐Saharan Africa? Crowding out, diversion, and benefit/cost assessments. Agric. Econ. 44(6), 687–703

Abstract

AbstractJayne et al. make a valuable contribution to emerging empirical evidence on agricultural input subsidy programs in Africa by examining the effects of corrupt “diversion” of subsidized fertilizers on the displacement or crowding out effects of farmers’ purchases of subsidized fertilizer on purchases of unsubsidized fertilizer. Unfortunately, their estimation of the effects of this on economic and financial benefit cost ratios (BCRs) is methodologically flawed and, for Malawi, is also undermined by problematic use of data. This comment presents a consistent methodology for revised estimates of both economic BCR and fiscal efficiency for the Malawi program. This shows that the underlying economic BCR of subsidized fertilizers in Malawi has been higher than estimated by Jayne et al. and is largely unaffected by diversion and displacement, but that the fiscal efficiency of investments in the program is strongly affected by diversion and displacement in program implementation.