Reducing poverty by ‘ignoring the experts’? Evidence on input subsidies in Zambia

Abstract

Since the early 2000s, agricultural input subsidy programs (ISPs) have again become a popular agricultural development policy tool in sub-Saharan Africa. Although many of the programs include as objectives raising incomes and reducing poverty among smallholder farmers, there is limited empirical evidence on whether ISPs are achieving these goals. Focusing on the case of Zambia, we use nationally-representative household panel survey data to estimate the effects of ISP fertilizer and hybrid maize seed on smallholder farm household welfare. Results suggest that during the years of analysis, Zambia’s ISP reduced the poverty headcount ratio and poverty severity among these farm households by 1.5 and 9.0 percentage points, respectively. We found little evidence of spillover effects on households not directly participating in the program. However, we found some evidence of heterogeneous direct program effects: welfare improvements resulting from the ISP are greatest for households with farm sizes of 1–5 ha, female-headed households, and households with relatively older heads.