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THE PROBLEM: More than two-thirds of people in Sub-Saharan Africa rely on agriculture for employment and many of them live on small farms and earn less than $1 per day. In Africa, agricultural yields are lower than in than other parts of the world, in part because of the persistently low usage of fertilizer. Identifying ways to increase agricultural incomes is crucial to alleviating poverty.
THE SOLUTION: Introduce an innovative pricing scheme offering farmers small, time-limited discounts (15%) on fertilizer right after harvest.
COST EFFECTIVENESS: The coupon intervention has the potential to be extremely cost-effective. Since the subsidy is only 15% the cost of the fertilizer, and the returns to fertilizer average 50-80%, the increase in yields from the fertilizer greatly exceed the cost of the subsidy. Program administration entails minimal cost and simple logistics.
With support from DIV, Esther Duflo, the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT, in collaboration with colleagues from Harvard University, The University of California Santa Cruz, and Innovations for Poverty Action, will rigorously evaluate an innovative pricing scheme encouraging Kenyan farmers to use fertilizer to increase crop yields.
Studies have shown that chemical fertilizer, when used properly, can substantially raise agricultural yields. Yet in Africa, usage of fertilizer remains low and stagnant, which is a primary reason that yields in Africa are persistently lower than other parts of the world.
In previous work in Western Kenya applying behavioral economics—the study of how people make economic choices—the project’s investigators found that a major reason that farmers fail to invest in fertilizer is the difficulty in saving their harvest income until the time they need to buy fertilizer next season. Using field experiments, they also found that farmers have only limited information on the costs and benefits of fertilizer, and that learning about fertilizer through social networks is limited.
Building on this evidence to overcome barriers to fertilizer adoption, IPA will introduce and rigorously evaluate a new scheme offering farmers small, time-limited discounts (15%) on fertilizer that are available in a short window right after harvest. To further incentivize farmers to redeem coupons in a timely fashion, text message reminders will be sent to a randomly selected subset of farmers just before the redemption period ends. Text messages are extremely low-cost, and are a much more cost-effective and scalable approach than in-person home visits. Finally, to encourage diffusion of knowledge about fertilizers, a randomly selected group of farmers will be encouraged to form cooperatives with their friends and neighbors and to meet regularly to discuss farming issues. The project’s investigators will measure the impact of these interventions on fertilizer adoption and on whether they spur farmers to talk more about agriculture generally. Preliminary results from the project are promising: takeup of the coupons was reasonably high, and cooperative formation was very successful. Because the primary occupation of many poor women in Africa is farming, the program could potentially be of great benefit to women.
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Last updated: February 19, 2013