Abstract
In an attempt to go beyond the so called "smart" subsidies, Nigeria has embarked on a potentially innovative mobile phone-based input subsidy program that provides fertilizer and improved seed subsidies through electronic vouchers. In this article, we examined the productivity and welfare effects of the program using household-level data from rural Nigeria. The article employed instrumental variable regression approach to control for the potential endogeneity of the input subsidy program. Our results suggest that the program is effective in improving productivity and welfare outcomes of beneficiary smallholders. The size of the estimated effects suggests a large improvement in productivity and welfare outcomes. Moreover, the distributional effects of the program suggest no heterogeneity effects based on gender and farm land size. These results are robust to using alternative measurements of program participation. The benefit-cost ratio of 1.11 suggests that the program is marginally cost-effective. Overall, our results suggest that while improving average productivity is a good outcome for improving food security, improving the distributional outcome of the program by targeting the most disadvantaged groups would maximize the program's contribution to food security and poverty reduction.
Highlights
It is widely recognized that modern agricultural technologies are critical for improving smallholder agricultural productivity
We focus on productivity and welfare outcomes as they are the most important indicators given the stated objectives of the Growth Enhancement Support Scheme (GES)
These results suggest that GES benefitted female-headed households (FHHs) as much as male-headed households (MHHs)
Summary
It is widely recognized that modern agricultural technologies are critical for improving smallholder agricultural productivity. The number of years that the household head has lived in the village is a measure of socio-political capital that could influence farmer’s participation in the GES (Ricker-Gilbert et al, 2011) We assume that this variable has no direct effect on productivity and welfare outcomes except through its effect on farmers’ decisions to participate in the GES. Participation in the GES involves a sequence of steps and choices In our setup this process involves: becoming aware of the GES program, registering for the GES program, receiving a mobile alert and collecting subsidized fertilizer and improved seeds from redemption centers. The GES does not require participating farmers to use the subsidized inputs on a particular crop, we opt to consider maize yield as a productivity outcome variable as maize is one of the most important food crops in Nigeria. We found significant difference between the two groups in terms of the number of years the household head has resided in the village
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