Input Subsidy Research Articles

MASSAI: Multi-agent system for simulating sustainable agricultural intensification of smallholder farms in Africa

The research and development needed to achieve sustainability of African smallholder agricultural and natural systems has led to a wide array of theoretical frameworks for conceptualising socioecological processes and functions. However, there are few analytical tools for spatio-temporal empirical approaches to implement use cases, which is a prerequisite to understand the performance of smallholder farms in the real world. This study builds a multi-agent system (MAS) to operationalise the Sustainable Agricultural Intensification (SAI) theoretical framework (MASSAI). This is an essential tool for spatio-temporal simulation of farm productivity to evaluate sustainability trends into the future at fine scale of a managed plot. MASSAI evaluates dynamic nutrient transfer using smallholder nutrient monitoring functions which have been calibrated with parameters from Malawi and the region. It integrates two modules: the Environmental (EM) and Behavioural (BM) ones.•The EM assess dynamic natural nutrient inputs (sedimentation and atmospheric deposition) and outputs (leaching, erosion and gaseous loses) as a product of bioclimatic factors and land use activities.•An integrated BM assess the impact of farmer decisions which influence farm-level inputs (fertilizer, manure, biological N fixation) and outputs (crop yields and associated grain).•A use case of input subsidies, common in Africa, markedly influence fertilizer access and the impact of different policy scenarios on decision-making, crop productivity, and nutrient balance are simulated. This is of use for empirical analysis smallholder's sustainability trajectories given the pro-poor development policy support.

Striving to revive pulses in India with extension, input subsidies, and output price supports†

AbstractPulse production in India has stagnated relative to staple grains and cash crops, raising concerns about rural protein consumption. We experimentally evaluate an effort to increase local pulse production in Bihar. This intervention consisted of 2 years of input subsidies and extension to facilitate learning, followed by the creation of marketing organizations and a year of output price support to raise profitability. Farmers respond to price signals by expanding inputs when subsidized and increasing pulse sales under price supports. However, we see no evidence that the program shifted equilibrium production portfolios as pulses return to pre‐intervention levels after the support ends. Results indicate that short‐term learning by doing cannot overcome long‐run barriers to local pulse production, even when farmers have a viable outlet to sell their surplus output.

Impact of agricultural input subsidy policy on market participation and income distribution in Africa: A bottom-up/top-down approach

Previous literature on the effects of agricultural input subsidy programs on smallholder market participation has only focused on partial equilibrium analysis, while ignoring important general equilibrium effects. Therefore, this study fills this gap by highlighting the critical role of targeting in the implementation of the agricultural input policy in the Malawian context. Specifically, we establish a bi-directional link between a farm household model and a general equilibrium model in order to explore the spillover effects of the input policy on market orientation and income distribution. Based on the findings, the partial equilibrium analysis underestimates the effect of the input policy and neglects important heterogeneities between farmers. More importantly, we find that extending the program to farmers who are excluded from the cereal and/or labor markets can lead to higher market participation, economic growth, and a reduction in poverty. Our findings suggest better targeting to increase the impact of agricultural input policy on market participation.

The politics of agricultural policy and nutrition: A case study of Malawi's Farm Input Subsidy Programme (FISP).

The concept of food and nutrition policy has broadened from simply being an aspect of health policy, to policy interventions from across a wide range of sectors, but still with potentially important impact on nutritional outcomes. This wider and more complex conceptualisation involves policy with multiple objectives and stakeholder influences. Thus, it becomes particularly important to understand the dynamics of these policy processes, including policy design and implementation. To add to this literature, we apply the Kaleidoscope Model for understanding policy change in developing country contexts to the case-study of an agricultural input subsidy (AIS) programme in Malawi, the Farm Input Subsidy Programme (FISP), exploring the dynamics of the FISP policy process including nutritional impact. Over a three-month period between 2017 and 2019 we conducted in-depth interviews with key stakeholders at national and district levels, and focus groups with people from rural districts in Malawi. We also undertook a review of literature relating to the political economy of the FISP. We analysed the data thematically, as per the domains of the Kaleidoscope Model. The analysis across the FISP policy process including policy design and implementation highlights how stakeholders' ideas, interests and influence have shaped the evolution of FISP policy including constraints to policy improvement-and the nutritional impacts of this. This approach extends the literature on the tensions, contradictions and challenges in food and nutrition policy by examining the reasons that these occur in Malawi with the FISP. We also add to the political science and policy analysis literature on policy implementation, extending the concept of veto players to include those targeted by the policy. The findings are important for consideration by policymakers and other stakeholders seeking to address malnutrition in rural, food-insecure populations in Malawi and other low-income settings.

Effects of government policies reform on environmental sustainability: An integrated approach of PMP and system dynamics simulation model

The government's supportive policies in the agricultural sector may provide some goals intended by policymakers; however, they may have environmental, social, and sometimes economic inefficiencies. Therefore, policy analysis not only needs to examine the effectiveness of these policies from the point of view of economic components but also, in a more comprehensive view, should assess the impact of these policies on other aspects like sustainability. In this study, an integrated Positive Mathematical Programming (PMP) and System Dynamics (SD) model was developed to investigate the effects of the agricultural policy reform on the cultivation pattern and water resources sustainability in the Doroodzan Dam basin in Fars Province, southern Iran, where managing water resources is a seriously challenging due to population growth and periodic drought. The initial investigation involved analyzing how price policies (guaranteed price and world price of crops) and non-price policies (removal of subsidy payments to agricultural inputs and improvement of irrigation efficiency) impacted the cropping pattern. The results of the study showed that the most significant decrease in cropland area occurs due to the removal of agricultural input subsidies. Although this crop pattern can lead to environmental sustainability, it is not considered from the point of view of food self-sufficiency. Based on the results, applying world prices increase cropping area for crops like rice, which is a water-intensive crop. Another point was the high priority of onions, fodder corn, and beans while they are not subjected to governmental pricing intervention. This may indicate the extent of public policies' impact on agriculture. Although under some policy scenarios changes in the gross margin or cropping area do not sound significant, the water-saving nature of these policies is more compelling. Finally, the impact of altering cropping patterns along with climate change and population growth on water indices was assessed using SD modeling. Thus, reforming the government's policies in the agricultural sector may help reduce the water shortage index in the basin. The policy of removing subsidies for the agricultural inputs led to the attainment of the lowest water shortage index.

Food choice responses to changes in the price of a staple crop: a discrete choice experiment of maize in rural Malawi

Price and affordability are important drivers of food choice, particularly for rural smallholder farming households in Malawi, experiencing extreme poverty, food insecurity, and lack of dietary diversity. Lowering the cost of staple crops such as maize targeted by agricultural input subsidy programmes (AISPs) may potentially increase consumption of the staple crop, but it might also lead to consumption of a more diverse range of foods. Using a discrete choice experiment, this study investigated food choice responses to changes in maize price in rural Malawi. Study participants (n = 400) were given a series of choice tasks for which they were asked to choose between food baskets with varying cost, reflecting local prices and with maize at both high and low price. Baskets contained different types of foods including maize, rice, cabbage, small-dried fish, and/or a soft drink. The data were analysed using mixed logit models including investigation of heterogenous effects based on socio-demographic characteristics, food security and actual market purchases. Individuals revealed a preference, as expected, for lower cost food baskets. Small-dried fish and cabbage were the highest valued food products. At a low cost of maize, the expected utility from a basket with maize was greater than a basket with other items, particularly among households with high- and low-food purchases, low socioeconomic status, living in Phalombe District, and experiencing food insecurity, indicating that among such populations a low price of maize will not necessarily lead to increases in dietary diversity. In contrast, among households living in Lilongwe District, with high SES and food secure, a lower maize price will not lead to a loss in dietary diversity as they prefer a basket containing non-maize products over maize. The findings suggest that achieving food security and dietary diversity may require a range of policy approaches addressing different pathways of impact as opposed to relying on subsidizing inputs for staple crop production.

Input subsidies, public investments and agricultural productivity in India

The fund allocation in agricultural sector in India is heavily tilted toward input subsidies provision; however, researchers seem to favor investment expenditure instead. The present paper seeks to compare the usefulness of input subsidies as compared to investment with regard to agricultural productivity so that policy makers hit the right tool and avoid less productive state expenditure. We investigated a total of four regression models using autoregressive and distributed lag cointegration in a time series framework covering period from 1983 to 2019. The first model considers all input subsidies in aggregate form, and the rest three models take input subsidies in disaggregate forms, namely fertilizer subsidy, irrigation subsidy and power subsidy, respectively. It is observed from the results that input subsidies still contribute more than what public investment does to agricultural productivity. It is also found that power subsidy is the most effective component of input subsidies followed by fertilizer subsidy. Hence, government expenditure on input subsidies is justified on the ground that it ensures all farmers to have access to affordable agricultural inputs. Targeted subsidies combined with adequate investment in agricultural infrastructure could deliver long-term agricultural development in India.

The Impact of Input and Output Farm Subsidies on Farmer Welfare, Income Disparity, and Consumer Surplus

Because of a growing population and shrinking arable land, the world is facing a global food crisis. One important solution could be to subsidize farmers to sustain their production so that they can produce more food for consumers and earn more money for themselves. An efficient subsidy program should also aim to reduce income inequality among farmers, as measured by the Gini coefficient of farmers’ income. In this paper, we examine and compare the effects of input and output farm subsidy programs. The input subsidy reduces the farmers’ input purchasing costs, whereas the output subsidy reduces the farmers’ output processing costs. By considering a continuum of infinitesimal price-taking farmers who are heterogeneous in their average yield rates, our equilibrium analysis of a game-theoretical model yields three results. First, both subsidy schemes reduce the aggregate income inequality measured by the Gini coefficient. However, they create the following “opposite” effects: the input subsidy decreases the income gap among farmers (under mild conditions), whereas the output subsidy increases it. Second, farmers with low yield rates prefer the input subsidy, whereas farmers with high yield rates prefer the output subsidy. Third, the output subsidy scheme is more effective in improving the total farmer income than the input subsidy scheme, whereas the input subsidy scheme is more effective in reducing income disparities and improving consumer surplus than the output subsidy scheme. Our results provide new insights for policymakers who are crafting subsidy schemes. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71971184, 71972025, and 72032001], the Departmental General Research Fund of the Hong Kong Polytechnic University [Grant P0008761], and the Research Grants Council of Hong Kong [Grants 15504615 and 15500820]. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4850 .

The Impact of Government Food Policy on Farm Efficiency of Beneficiary Small-Scale Farmers in Indonesia

Enhancing self-sufficiency and national food security have been strategic policy goals of the Indonesian government. From 2015 to 2019, a food policy program called Upsus Pajale had been implemented to provide input subsidies and extension assistants to farmers for three strategic commodities: rice, maize, and soybeans, to accelerate productivity and increase production. The study was done by interviewing 374 beneficiary farmers. The objectives were to explore production efficiency and the farmers’ perspectives on the policy programs. By conducting stochastic frontier production function estimation, the results show that the mean efficiency level was 0.866. This study revealed that land size, seed cost, and labor cost were found to be important determinants of technical efficiency. In addition, the results of the inefficiency model indicated that age and farmers’ associations had a significant and positive effect on efficiency scores, whereas education had a negative effect. Contrarily, none of the policy program instruments appear to be essential determinants of efficiency. Furthermore, the research found that farmers prioritized their habits and profitability when deciding which crop to cultivate and that pests were their main concerns. Hence, the government should focus on enhancing research and development for improved seedling pest management control and encourage the establishment of farmers’ association to share experience and transfer information and technology for farmers to improve their efficiency.

The politics of policy failure in Ghana: The case of oil palm

The paper argues that political economy factors have hindered the development of the oil palm value chain in Ghana, which has consistently underperformed despite significant policy support and the sector's strategic importance to the national economy. These factors include political instability between the mid-1960s and early 1980s, as well as the emergence of a competitive clientelist political settlement since the country's return to constitutional rule. Drawing on key informant interviews and documentary sources, the paper demonstrates that policies over the past two decades have failed to address the peculiar nature of the value chain, which is bifurcated into a smallholder/artisanal sub-sector and an estate/industrial processing sub-sector. Since the 1990s, one aspect of policy failure in the sector has been the ‘paradox of good intentions’ that arises from the simultaneous pursuit of economic transformation and inclusive development in a political context described by some scholars as 'strong democracy, weak state'. The logic of electoral competition shortens politicians’ time horizons, predisposing them to prioritise highly visible distributive policies (like input subsidies) over structural reforms (like land tenure issues or solving market frictions). Consequently, despite almost two centuries of continuous policy support, the sector’s productivity remains at the same level it would have been if it had been left to operate without any state assistance.

Farmer responses to an input subsidy and co-learning program: intensification, extensification, specialization, and diversification?

Sustainable intensification aims to increase production and improve livelihoods of smallholder farmers in sub-Saharan Africa. Many farmers, however, are caught in a vicious cycle of low productivity and lack of incentives to invest in agricultural inputs. Moving towards sustainable intensification therefore requires support such as input subsidies and learning about new options through, for instance, co-learning approaches. Yet such support is not straightforward as agricultural developments often diverge from the envisaged pathways: extensification may occur instead of intensification and specialization instead of diversification. Understanding of farmers’ responses to incentives such as input subsidies and new knowledge is lacking. Our overarching aim was to improve this understanding, in order to better support future pathways for agricultural development in smallholder farming. Over five seasons, we compared the responses of farmers in western Kenya taking part in a novel co-learning program we developed, which included provision of an input voucher, with the responses of farmers who only received a voucher. We also assessed the differences before and during the program. We used diverse indicators that were related to the different agricultural development pathways. Farmer responses were mainly a result of the input voucher. Farmers increased maize yields (intensification) and maize area (specialization) for maize self-sufficiency. Increased farm and maize areas in combination with relatively low N application rates also pointed to extensification coupled with the risk of soil N mining. Diversification by increasing the soybean and groundnut area share was facilitated by the integrated co-learning approach, which thereby supported relatively complex farm management changes. Our results highlight the difficulty of enabling yield and production increases, while also meeting environmental and economic goals. The diversity of farmer responses and constraints beyond the farm level underlined the importance of wider socio-economic developments in addition to support of sustainable intensification at farm level.

Mung bean production as a source of livelihood among farmers in a municipality in the Philippines: Challenges and opportunities

This study explored the opportunities and challenges of mung bean production as a source of livelihood among farmers in the municipality of Cuyapo Nueva Ecija, where 223.4 hectares have been devoted to mung bean farming. The study used a descriptive research design and surveyed 214 mung bean farmers from 51 barangays in the municipality. The results of the study revealed that mung bean production provides income to farmers, having a 116.81% return on investment as shown in the cost and return analysis conducted. Mung bean production also provides additional income to local households as many laborers are needed, particularly during the harvesting period. However, mung bean farmers were challenged by the high cost of farm inputs, the low farmgate price of their mung bean harvest, farm destruction caused by stray farm animals, the threat of widespread pest infestation, and the low volume of production. To support the farmers in coping with these challenges, national and local government agencies might provide them with farm input subsidies, cash aid, marketing support, and technical assistance regarding proper crop management.

The influence of off-farm work on farm income among smallholder farm households in northern Ghana

Income diversification is an essential livelihood strategy among small-scale farmers in low-income countries. Through income diversification, farmers can potentially invest off-farm earnings into their farm business to enhance productivity and income from farming. Conversely, working off-farm can lead to a labour-loss effect which can reduce farm performance. This study therefore assesses the effect of off-farm work (OFW) on farm income using data from 486 smallholder farmers in northern Ghana. An endogenous treatment regression model was used to assess the effect of diversifying income sources on farm income. The results showed that involvement in OFW enhanced farm income per acre by GH¢ 386. Other factors that enhanced farm income included years of formal education and access to extension services and input subsidy. Farmer group membership and household size however reduced farm income. The farm sector can therefore take advantage of the positive linkage with the non-farm sector to improve farm income levels of farmers. In this light, government’s rural industrialization policy should seek to provide more job opportunities outside the farm sector to enable smallholder farmers to take advantage of such opportunities to improve income from on-farm activities.

Comparative advantages and factors affecting agriculture production and income in the food estate area on the Indonesia–Timor-Leste border

The Indonesian government has created a food estate area in Belu Regency, supported by the construction of the Rotiklot Dam, in the expectation that it would increase agricultural production and income, as well as stimulate the economy of the border region. The study aims to analyze (i) the comparative advantage of agricultural commodities in the food estate area and (ii) the effect of social characteristics and physical inputs on increasing farmers’ production and income in the food estate area in the border region. The data used consisted of primary data obtained from interviews with 300 respondents, selected through purposive sampling from a population of 4500, and secondary data from related agencies. The data analysis employed location quotient (LQ) and the partial least squares approach to structural equation modeling (SEM-PLS). Social input was reflected by 5 variables and physical input by 3 variables, while production was reflected by 6 variables and income by 7 variables. The LQ results show that maize and rice production in the food estate area is superior to other areas, and maize grows faster than rice crops. The comparative advantage is due to physical and social factors; based on the results of SEM-PLS, physical factors have direct and indirect effects on production and income, while social factors have an indirect effect on farmers' income through agricultural production. Expansion of the planting area by utilizing water from the Rotiklot Dam and increasing the motivation of farmers through input subsidies are needed to optimize the increase in farmers' production and income.

Agricultural input subsidies, extension services, and farm labour productivity nexus: Evidence from maize farmers in Tanzania

AbstractThis paper examines the effect of agricultural input subsidies (AIS) and agricultural extension services (AES) on farm labour productivity in plots planted with maize in Tanzania, using panel data from the National Panel Survey in Tanzania. To control for the endogeneity of the two programmes, a control function and instrumental variable approach is used to estimate the effects of AIS and AES on farm labour productivity. The results show that AIS and AES are significant in raising labour productivity in maize‐planted plots. Similarly, AIS and AES are also effective in increasing land productivity in these plots. Moreover, each programme has comparable effects on land productivity and farm labour productivity. These findings imply that public investments in AIS and AES are effective in raising farm productivity.

The Awareness and Adoption of Environmentally Sustainable Practices by Agricultural Cooperative Members in Zambia

As the world population is continuously growing, agricultural practices should be done sustainably to achieve food security, nutrition, and economic success. Due to the networking, economies of scale and improved access to information, collective actions and producers' cooperatives seem to be a good instrument for acquiring, sharing and promoting such practices. Therefore, the main aim of this study was to estimate the effect of cooperative membership on the awareness and adoption of environmentally sustainable practices. We purposively selected 210 members and 166 non-members of maize cooperatives in the Southern province of Zambia. To cater for both observed and unobserved bias in the study, we adopted the propensity score matching and endogenous treatment effect models. The study results confirm that cooperative membership positively influences the awareness and adoption of sustainable environmental practices used in the study but encourages the usage of synthetic fertilizers because of the government input subsidy.

The sensitivity of food security to agricultural input subsidies in Uganda

The agricultural sector plays a crucial role in addressing food insecurity and malnutrition in developing countries, and smallholder farmers are significant contributors to food production. In Uganda, the National Agricultural Advisory Services (NAADS) program was initiated in 2001 to provide extension services and agricultural input subsidies to farmers. However, the program has faced criticism for its high levels of corruption, militarization, and political influence, as well as for its failure to reach its intended beneficiaries, and smallholder farmers. This paper aims to examine the contribution of smallholder farmers to food security and its sensitivity to agricultural input subsidies in Uganda, with a focus on the NAADS program. Additionally, it covers the evolution of agricultural input subsidy policy in Uganda from 1987 to the present and analyses the findings on the impact of these subsidies on smallholder farmer productivity and food security. The findings conclude that the NAADS program contributes less to the target beneficiaries, and its priorities do not align with the set goals. The study further suggests several recommendations for improving the program and addressing the issues facing smallholder farmers in Uganda.

THE EFFECT OF FERTILIZER AND AGRICULTURAL MACHINERY SUBSIDIES ON PADDY PRODUCTIVITY: A FEASIBLE GENERALIZED LEAST SQUARES APPROACH

<p><em>Paddy is a commodity that is widely cultivated by farmers in Indonesia. Paddy farmers are currently facing the threat of declining farm productivity due to land conversion activities, access to inputs that are difficult to reach, and climate change. However, productivity can be increased through the use of fertilizer inputs and agricultural machinery. Government support for paddy farmers is provided through input subsidies and agricultural machinery. Therefore, this study explores the effect of input subsidies and agricultural machinery on paddy productivity. We selected 20 provinces with the highest proportion of paddy fields to the total area. Feasible Generalized Least Squares (FGLS) analysis is used to determine the effect of subsidies on fertilizers and agricultural machinery on paddy productivity in Indonesia. The results showed that input subsidies were mostly allocated to Java, Sumatra, and Sulawesi islands, while agricultural machinery was allocated more to Sulawesi and Nusa Tenggara islands. FGLS analysis shows that the area of irrigated land, subsidies for urea fertilizer, subsidies for NPK fertilizers, subsidies for ZA fertilizers, and grants for 2-wheel tractors affect increasing paddy productivity. Meanwhile, the effect of increasing temperature causes a decrease in paddy productivity.</em></p>

Efficacy of public spending for agricultural development in India: a disaggregate analysis contextualizing subsidies vs investment debate

PurposeThe primary objective of the present study is to figure out the relative effectiveness of alternate public expenditure with regard to agricultural development particularly in the context of input subsidies vis-a-vis investment. Besides, the authors also endeavour to test the applicability of crowding-out hypothesis in the present context.Design/methodology/approachInitially, unit root tests are applied for checking stationarity of the underlying data using Augmented Dickey-Fuller (ADF) and Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests. Further, the highly celebrated autoregressive distributive lag (ARDL) model is applied on annual time series data for the period 1991–2020 to investigate the long-run and short-run impact of the said relationship.FindingsThe authors observe that public investment is more productive than input subsidies for overall agricultural development. Besides, the findings document the existence of crowding-in hypothesis, i.e. complementarity between public investment and private investment in case of the agricultural sector in India.Research limitations/implicationsThe outcome of the research recommends to reprioritize state expenditure and reformulate agricultural policy regarding the public financing of agriculture. More to invest and less to subsidize seems a better policy intervention to achieve desirable outcomes from the Indian agriculture in the long run.Originality/valueThis study is novel in the sense that the subsidies vs investment debate is revisited in the current scenario of agricultural development so that resource allocation be optimized. To ensure robustness of the study, the authors specifically took four proxies of agricultural development, namely, productivity growth, private investment, food security and farmers’ income.

Determinants that Affecting the Production of Haricot Bean by Small Holder Farmers in Oromia Region of Ethiopia

Haricot bean is an important crop, which serves as a consumption and source of income, but its production and productivity is low. So this study aimed to analyze the factor affecting haricot bean producer small holder farmers Oromia regional state of Ethiopia. The data for the analysis were obtained from the World Bank data published on their website in 2018. The result of the log linear regression shows it is possible to increase production of haricot bean by increasing the supply of seed, fertilizer, education, total income, family size and land size these variables citrus-paribus significantly influence production positively but price of significantly influences small holder farmers production of haricot bean negatively. The policy implications of the present findings are to have educating the small holder farmers, encouraging using educated family, providing access haricot bean seed for small holder producer farmers, setting minimum procurement price for inputs and providing input subsidies, ease delivery of inputs, encouraging and training ways allocating land for different haricot bean crop, diversified income sources should be created in order to increase income of the farmers. The Government, MoA, Regional Agricultural office, Zonal and woreda’s Agricultural office, NGO, Researchers and scholars are needed to further promote production of improved haricot bean by designing based on farmer’s problem and need Keywords: Log linear, Haricot bean, production, Oromia, Ethiopia DOI: 10.7176/JNSR/14-4-01 Publication date: February 28 th 2023