34 The baseline agricultural (resp. manufacturing) sector is smaller (resp. larger) in the homothetic case. Since a large manufacturing sector acts as buffer that attenuates the ban’s negative effects on mobile workers (as explained in Section VII.B), mobile workers suffer less in the homothetic case.

We then run a similar exercise to demonstrate the importance of fertilizer subsidies. Starting from the baseline equilibrium estimated in Section VI, we set subsidy rates ( _{sk}_<sup>_K_</sup> _k_ =1<sup>) to zero, com-</sup> pute the resulting baseline equilibrium, then impose QRs and recompute this equilibrium. Column (3) of Table VI shows the absence of subsidies intensifies the welfare losses of mobile workers while ameliorating those of tea estate workers and the representative farmer. The intuition for this finding lies in the fact that subsidies are financed through a flat tax on the income of all agents. In practice, such scheme corresponds to a net income transfer from mobile workers to farmers and estate workers. By drastically reducing fertilizer use in the country, the ban also reduces the total amount of subsidies and, consequently, the scale of the transfer scheme, thus helping mobile workers and hurting farmers and tea workers. In contrast, in a world without subsidies this transfer scheme does not exist in the first place, so the “subsidy scale-down” channel just described is absent from the ban’s welfare effects. Hence the worse (resp. milder) welfare losses of mobile workers (resp. farmers and estate workers) in the case without subsidies.<sup>87</sup> Interestingly, in this no-subsidy exercise, the ban decreases fertilizer imports by 197 million USD and total agricultural exports by 278 million USD. That is, foreign exchange “savings” through lower imports are _more than completely offset_ by a corresponding reduction in agricultural exports, in contrast to a mere 48% “offset factor” in our main estimates (see Section VII.B).<sup>88</sup> In the absence of fertilizer subsidies, there is a closer correspondence between the import price of fertilizer and its marginal revenue product. As a result, the reduction in fertilizer use induced by the ban decreases agricultural export revenues and fertilizer imports by roughly similar amounts.

# **VII.E Influence of Modeling Trade Policy: Iceberg Trade Costs versus Quantitative Restriction**

In our model, trade policy is represented by QRs. This differs from much of the NTM literature, which models NTMs as an increase in multiplicative “iceberg” trade costs.<sup>89</sup> These modeling choices are often not innocuous: while QRs raise prices and create rents that can be captured by certain domestic agents, the price increases resulting from iceberg trade costs are typically modeled as losses, with no one benefiting from them. Therefore, using iceberg trade costs to model what is

> homothetic model matches the ILO data much more closely than the homothetic model.

> 87This also implies a smaller gap in welfare losses between workers and farmers relative to the case with subsidies (Column 1 of Table VI), leading us to underestimate how unequal the incidence of the ban is across occupations.

> 88The 48% offset factor is computed by comparing the decrease in agricultural exports (596 million USD) to the decrease in fertilizer imports (1.253 billion USD) in our main estimates displayed in Table IV.

> 89One exception is Atkin et al. (2024), who explicitly model a discretionary import licensing system.