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# **IV Stylized Facts on Fertilizer Imports, Agricultural Production and Exports**

In this section, we present three stylized facts related to the fertilizer import ban’s adverse effects on fertilizer imports, crop yields, and exports of agricultural goods that utilize fertilizer.

## **IV.A Fact 1: Fertilizer Imports Declined After the Ban**

We start by examining whether the import ban was effective in restricting imports. To do this, we estimate dynamic DID regressions using import data at the product-month level, where a product is defined as a unique Harmonized System 8-digit (HS8) code. The treated group consists of fertilizer products whose imports were banned after April 2021 and the control group consists of products that were not banned (both non-banned fertilizers and other types of non-banned products). We compare fertilizer imports in the treatment group with their control group counterparts following the DID methods proposed by De Chaisemartin and d’Haultfoeuille (2022), which allow units to switch in and out of treatment. This is key for our study as the import ban was lifted less than one year after it was first introduced.<sup>26</sup> Our dynamic DID estimator recovers the evolving effects of the ban over time on two outcome variables: a dummy indicating non-zero imports (i.e., extensive margin) and the log of import value (i.e., intensive margin) at the product-month level between January 2019 and September 2022. Estimation details are provided in Appendix B.A.

Figure I plots the DID results, showing a clear decline in imports right after the ban was imposed, with the average probability of nonzero imports across banned products dropping by 31 percentage points in the second month of the ban (Figure Ia). Along the intensive margin, negative effects peaked four months after the ban was introduced, with imports falling by 99.998% (Figure Ib) and remaining low for the next several months.<sup>27</sup> We also obtain DID estimates based on a smaller sample including only fertilizer products, thus comparing how the imports of banned versus non-banned fertilizers evolve over time after the ban is introduced. The results, albeit less precisely estimated, are qualitatively maintained (Appendix Figure A4). Due to complementarities in production, banning the imports of chemical fertilizers may also have negatively affected other fertilizers. On the intensive margin, a large difference in imports across banned and non-banned fertilizers emerged four months after the ban was introduced and persisted for several months thereafter.<sup>28</sup>

> 26See Callaway (2023) for a complete review of DID methods.

> 27The coefficient for month _t_ = 4 in Figure Ib equals -10.8. Given the log specification, the corresponding percentage effect on imports can be recovered through the expression: (exp( _−_ 10 _._ 8) _−_ 1) _×_ 100% _≃−_ 99 _._ 998%.

> 28As an additional check, we also obtain DID estimates using the log of imported product _quantities_ as the outcome variable. The ban’s effects on fertilizer imports remain very similar when imports are measured in kg instead of dollars (Appendix Figure A5). This is unsurprising, as Sri Lanka’s economy is arguably too small to influence the prices of