Nudging farmers to use fertilizer
Subtitle: theory and experimental evidence from Kenya
By: [by] Esther Duflo, Michael Kremer [and] Jonathan Robinson
Contributors: Kremer, Michael, 1964-; Robinson, Jonathan, 1979-; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 09-19; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 09-19.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2009
Place of publication: Cambridge, MA
Language: eng
Number of pages: 37
Description: 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. JEL Classifications: D03, O12, O33.
Notes: "June 26, 2009."

Includes bibliographical references (p. 36-37).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.