Nudging Farmers to Utilize Fertilizer: Theory and Experimental Evidence from Kenya

Michael Kremer, Esther Duflo and Jonathan Robinson

No 7402, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: While many developing-country policymakers see heavy fertilizer subsidies as critical to raising agricultural productivity, most economists see them as distortionary, regressive, environmentally unsound, and argue that they result in politicized, inefficient distribution of fertilizer supply. We model farmers as facing small fixed costs of purchasing fertilizer, and assume some are stochastically present-biased and not fully sophisticated about this bias. Even when relatively patient, such farmers may procrastinate, postponing fertilizer purchases until later periods, when they may be too impatient to purchase fertilizer. Consistent with the model, many farmers in Western Kenya fail to take advantage of apparently profitable fertilizer investments, but they do invest in response to small, time-limited discounts on the cost of acquiring fertilizer (free delivery) just after harvest. Later discounts have a smaller impact, and when given a choice of price schedules, many farmers choose schedules that induce advance purchase. Calibration suggests such small, time-limited discounts yield higher welfare than either laissez faire or heavy subsidies by helping present-biased farmers commit to fertilizer use without inducing those with standard preferences to substantially overuse fertilizer.

Keywords: Technology adoption; Hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D03 O12 O38 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-afr, nep-agr and nep-dev
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Citations: View citations in EconPapers (53)

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