Fertilizer price policy, the environment and farms behavior

Abstract

The analysis of the effects of fertilizer pricing on intensive agriculture and farms behavior ought to be an important topic of research for agricultural and environmental economists in Bangladesh. Several possibilities for fertilizer policy have been debated, in particular for the pricing of fertilizer. Following this observation, this study, contributes to that discussion by simulating the impact that various policies based upon the price of fertilizer could have on agricultural production. Specifically, the study analyzes the economic, social and environmental implications of alternative fertilizer policies using a multi-criteria model. For this purpose the weighted goal programming approach is used to estimate a utility function considering three criteria, the maximization of the total gross margin, the minimization of the variance of the total gross margin and the minimization of the labor. The model is applied to an agricultural region of Bangladesh. The empirical results show that the most important criterion in farmers’ utility function is the minimization of labor and circumstantially the maximization of total gross margin and the minimization of risk. Moreover they show that a policy of increased fertilizer price would have a very important impact on farm income and employment.