Going the Extra Mile: Farm Subsidies and Spatial Convergence in Agricultural Input Adoption
Many countries subsidize agricultural inputs but require farmers to travel to retailers to access inputs, just as for normal purchases. What effect do travel costs have on subsidy take-up and input usage, particularly for remote farmers? We analyze Malawi's Farm Input Subsidy Program (FISP), and show that travel-cost-adjusted prices are substantially higher in remote areas. However, subsidy redemption is nearly universal. We make use of a policy change in 2017-19 which took centralized control of beneficiary selection and find that FISP eliminates the sizeable remoteness gradient that exists for non-beneficiaries. Our results demonstrate that subsidy programs may narrow spatial inequities.
We are grateful to Jenny Aker for her collaboration and to Patrick Baxter, Emanuele Clemente, Calvin Mhango, Monica Shandal, Patrick Simbewe, and Asman Suleiman at IPA Malawi. USAID funded the data collection. We thank Sanjana Gupta for research assistance. We thank Justin Marion and seminar participants at UCSC for helpful comments. The data collection protocol was approved by the IRBs of the University of California, Santa Cruz and the Malawi National Committee on Research in the Social Sciences and Humanities. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors, and do not necessarily represent the views of the World Bank or its affiliated organizations, its Executive Directors or the governments they represent. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.