Do Remittances Promote Fertilizer Use? The Case of Ugandan Farmers

Abstract

A key factor that improves agricultural productivity is land fertility. Even though the benefits from using fertilizers are well documented and widely accepted, a low level of adoption and use is observed among farmers in developing countries. According to the literature, several constraints such as lack of access to credit and insurance can explain the low level of fertilizer use among African farmers. In this paper, I investigate whether remittances have the potential to remove these constraints by promoting higher fertilizer use. In order to address this research question, I use the Ugandan Living Standards Measurement Study‐Integrated Surveys on Agriculture (LSMS‐ISA) from the World Bank. The article provides a separate analysis between organic and inorganic fertilizer, as inorganic fertilizer is riskier and more expensive than the organic options. In an instrumental variable empirical framework, I find that remittances promote fertilizer use, in particular the organic fertilizer. To unpack the mechanisms behind, the article further shows that remittances (a) induce farmers to invest in livestock and (b) act as a buffer to rainfall variability in the case of inorganic fertilize use. The results indicate that remittances can, at least partially, remove credit and insurance constraints and promote fertilizer among Ugandan farmers.