Resource information
In Africa, farmers have been reluctant
to take up new varieties of staple crops developed to boost
smallholder yields and rural incomes. Low fertilizer use is
often mentioned as a proximate cause, but some believe the
problem originates with incomplete input markets. As a
remedy, African governments have introduced technology
adoption programs with fertilizer subsidies as a core
component. Still, the links between market performance and
choices about using fertilizer are poorly articulated in
empirical studies and policy discussions, making it
difficult to judge whether the programs are expected to
generate lasting benefits or to simply offset high
fertilizer prices. This paper develops a conceptual model to
show how choices made by agents supplying input services
combine with household livelihood settings to generate
heterogeneous decisions about fertilizer use. An applied
model is estimated with data from a panel survey in rural
Ethiopia. The results suggest that adverse market conditions
limit the adoption of fertilizer-based technologies,
especially among resource-poor households. Farmers appear to
respond to market signals in the aggregate and this provides
a pathway for subsidies to stimulate demand. However, the
research suggests that lowering transaction costs, through
investments in infrastructure and market institutions, can
generate deeper effects by expanding the technologies
available to farmers across all pricing outcomes.
