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

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.

Duflo, Kremer and Robinson (2009)

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Rural: Busia district.RCT.Farmers randomly offered one of the following: the chance to purchase a voucher immediately after the harvest, the chance to purchase at the time of their choosing, fertilizer at regular price with free delivery 2-4 months after harvest or fertilizer at a 50% subsidy with free delivery 2-4 months after harvest.Fertilizer use increased in every group (from 14-22% on a base of 23%), except for the group allowed to purchase fertilizer at the regular price.http://www.nber.org/papers/w15131924 farmers (841 in follow-up) with children enrolled in 16 local schools.