The Effect of Household Wealth on Fertiliser Use in the Presence of Uncertainty

Abstract

Previous studies of wealth effect on fertiliser use have produced mixed results on the direction of the impact. Our article looks at this issue from a different perspective by considering the presence of doubts, such as about the true content or general effectiveness of fertiliser. We show theoretically that there could be different responses between the high-wealth and low-wealth farmers. We analyse also the wealth effect empirically using household panel data from the Hebei province of China. The results indicate that the direction of wealth effect does indeed change across the different levels of farmers’ wealth.