We estimate the impact of Malawi’s Farm Input Subsidy Program using an economywide approach. We find potentially substantial net benefits with indirect benefits accounting for about two-fifths of total benefits. Due to these indirect benefits, the cutoff at which lower fertilizer yield response rates lead to net program losses is much lower than the value suggested by existing partial equilibrium evaluations. Benefits decline with domestic financing and real fertilizer prices increases. Abstracting from extreme events, Malawi’s program potentially generates double-dividends through higher and more drought-resilient yields. Overall, our results buttress arguments for patience and a focus on program efficiency improvements.
Arndt, Channing, Karl Pauw, and James Thurlow. 2014. The economywide impacts and risks of Malawi’s farm input subsidy program. Selected Paper prepared for presentation at the Agricultural & Applied Economics Association’s 2014 AAEA Annual Meeting.