Program evaluation of agricultural input subsidies in Malawi using treatment effects: Methods and practicability based on propensity scores

Chirwa, Themba G. (2010): Program evaluation of agricultural input subsidies in Malawi using treatment effects: Methods and practicability based on propensity scores.

Abstract

Several evaluations have been conducted to assess the impact of agricultural input subsidies in Malawi but have been mostly either descriptive or qualitatively inferred of the intervention impacts on the overall goal of the subsidy program. In most studies cited in this paper their approaches do not control for misspecification errors that might arise due to selection bias. One common erroneous approach is the lack of controlling for treatment effects. In this study we employ quasi-experimental econometric techniques using propensity scores to control for selection bias by creating control groups for those individuals that benefit from agricultural input subsidies. The study utilizes raw household data from two surveys conducted through the Malawi National Statistical Office in 2004/05 and 2006/07 production seasons. A household model for each dataset is estimated together with Average Treatment Effects on the Treated to assess the impact of targeted fertilizer input subsidies in 2004/05 and a refined program adopted in 2006/07 production periods. The evidence suggest that the starter pack or targeted input program implemented before 2004/05 focusing on one tenth of a hectare had a significant negative impact on household food expenditures compared to the refined program in 2006/07 that targeted about half a hectare for marginalized smallholder farmers. The latter, though portraying mostly insignificant results, showed positive impacts on household food expenditures. The approach adopted also proposes ways in which policy makers can effectively and independently evaluate the impact of public programs on social and economic welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fertilizer Subsidies; Propensity Scores; Logit; Nearest Neighbor; Stratification; Kernel; Radius; Complex Survey Design; Average Treatment Effects on the Treated
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D13 - Household Production and Intrahousehold Allocation; H - Public Economics > H4 - Publicly Provided Goods > H43 - Project Evaluation ; Social Discount Rate; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I38 - Government Policy ; Provision and Effects of Welfare Programs; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

References

Becker, S. O., and A. Ichino (2009), ‘Estimation of Average Treatment Effects Based on Propensity Scores’, available at www2.dse.unibo.it/ichino/psj7.pdf

Bellemare, M., C. Barrett (2006), ‘An Ordered Tobit Model of Market Participation: Evidence from Kenya and Ethiopia’, American Journal of Agricultural Economics, 88(2): 324-337

Browyn, H., and A. Maffioli (2008), ‘Evaluating the Impact of Technology Development Funds in Emerging Economies: evidence from Latin America,’ a Technical Report available at http://hd1.handle.net/10086/15999

Cameron, A. C. and P. K. Trivedi (2005), Microeconometrics: Methods and Applications, New York: Cambridge University Press

Croppenstedt, A., M. Demke, M. Meschi (2003), ‘Technology Adoption in the Presence of Constraints: The Case of Fertilizer Demand in Ethiopia’, Review of Development Economics, 7(1): 58-70

Dehejia, R. H., and S. Wahba (1999), ‘Causal Effects in Non-Experimental Studies: re-evaluating the evaluation of training programs’, Journal of the American Statistical Association, 94, 1053-1062

Dorward, A., E. Chirwa, V. Kelly, T. S. Jayne, R. Slater, and D. Boughton (2008), ‘Evaluation of the 2006/07 Agricultural Input Subsidy Programme, Malawi’, Final Report, Ministry of Agriculture and Food Security, Lilongwe: March

Duflo, E., M. Kremer, J. Robinson (2008), ‘How High are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya’, American Economics Association Meetings, New Orleans, Los Angeles: January

Franses, S. (1995), Adjustment and Poverty: Options and Choices. New York: Routledge

Gravelle, H. and R. Rees (2004), ‘Microeconomics’, Third Edition, Edinburgh Gate: Pearson Education Limited

Gregory, I. (2006), ‘The Role of Input Vouchers in Pro-Poor Growth’, Background Paper Prepared for the African Fertilizer Summit, Abuja, Nigeria: June 9-13

Jayne, T. S., J. Govereh, M. Wanzala, M. Demke (2003), ‘Fertilizer Market Development: a comparative analysis of Ethiopia, Kenya and Zambia’, Food Policy: 28(4): 293-326

Kelly, V. and A. Mukerezi (2000), ‘Fertilizer Response and Profitability in Rwanda’, Ministry of Agriculture, Animal Resources and Forestry, Kigali, Rwanda: February

Key, N., E. Sadoulet, A. de Janvry (2000), ‘Transaction Costs and Agricultural Household Supply Response’, American Journal of Agricultural Economics, 82(5): 245-259

Kherallah, M., C. Delgado, E. Gabre-Madhin, N. Minot, M. Johnson (2000), ‘Agricultural Market Reform in Sub-Saharan Africa: a synthesis of research findings’, Washington D. C.: International Food Policy Research Institute

Malawi Government (1971), ‘Statement of Development Policies 1971-1980’, Office of the President and Cabinet: Economic Planning Division.

Malawi Government (1987), ‘Statement of Development Policies 1987-1996’, Office of the President and Cabinet: Department of Economic Planning and Development

Malawi Government (2002), ‘Malawi Poverty and Reduction Strategy Paper’, Lilongwe: Ministry of Economic Planning and Development.

Malawi Government (2006), ‘Malawi Growth and Development Strategy: From Poverty to Prosperity 2006-2011’, Lilongwe: Ministry of Economic Planning and Development

Ricker-Gilbert J., T. S. Jayne and J. R. Black (2009), ‘Does Subsidizing Fertilizer Increase Yields? Evidence from Malawi’, Selected paper prepared for presentation at the Agricultural and Applied Economics Association 2009 AAEA and ACCI Joint Annual Meeting, Milwaukee, Wisconsin, July 26-29, 2009

Rosenbaum, P., and D. B. Rubin (1983), ‘The Central Role of Propensity Score in Observational Studies for Causal Effects,’ Biometrika, 70, 227-240

Rostow, W. W. (1963). The Economics of Take-Off into Sustained Growth: Proceedings of a Conference held by the International Economic Association. W. W. Rostow (ed.), London: Macmillan.

Sadoulet, E., and A. de Janvry (1995), ‘Quantitative Development Policy Analysis’, Baltimore and London: The John Hopkins University Press

Schultz, T. W. (1945), Food for the World. Chicago: University of Chicago Press

Tarp, F. (1993), Stabilization and Structural Adjustment: Macroeconomic frameworks for analyzing the crisis in Sub-Saharan Africa. New York: Routledge