# **1. Introduction**

In Africa, many smallholder farmers are reluctant or unable to purchase fertilizer and apply it to the staple crops they grow, despite evidence that doing so would improve their incomes. This is worrisome for policy makers since fertilizer is needed to sustain the fertility of African soils and to take full advantage of the potential gains from new varieties of staple crops developed with smallholder farms in mind. Furthermore, the places where agricultural productivity is low are often also the places where households are disproportionately poor and rely more on agriculture for their livelihoods. The welfare and productivity of smallholder farmers are entwined with future gains in affordable food supplies for many African countries as well. The agricultural sectors of Sub-Saharan Africa are largely made up of small farms and there is evidence that the average African farm has become smaller rather than larger in recent decades (Lowder, Skoet and Singh 2014). Consequently, African governments, development organizations, and many NGOs see boosting productivity on smallholder farms as a key way to reduce rural poverty and safeguard the food security of farming and non-farming households (Otsuka and Larson 2013). In turn, finding ways to prompt African smallholders to use more fertilizer is often a key tactic in rural development strategies.<sup>2</sup> In this paper, we examine the role general market participation has for smallholder decisions about fertilizer and the consequences for smallholder maize yields in Uganda. Many smallholder farmers growing maize in Uganda harvest two crops and we exploit a 2009-10 survey that covers both cropping seasons to examine how diversification and other ex-ante risk mitigation strategies across growing seasons sets the stage for productivity outcomes.

Recently, some researchers have argued that poorly functioning fertilizer markets constrain smallholder productivity by limiting the availability of fertilizer and keeping its price unreasonably high. With this as prologue, we consider an empirical model of productivity in which the choice about using fertilizer is endogenous, but is constrained by market performance and social norms. Controlling for heterogeneous farm-gate prices using fixed spatial effects, we use instruments that address the informational, social, and financial constraints that might additionally limit fertilizer demand. The empirical model performs well overall and passes a variety of tests designed to detect problems associated with our choice of instruments.

An important empirical result from our research has to do with gender. In productivity studies, the gender of the farmer, included as an exogenous control, often suggests that women are less productive farmers than men. We find this as well in simple OLS regressions. However, the measured gender gap goes away once we use variables associated with market and extension interactions that are potentially influenced by traditional gender roles. The model is consistent with the notion that the gender of the farmer per se does not directly affect productivity outcomes, but does influence fertilizer purchases, which affect eventual productivity outcomes. The results indicate that what does matter for productivity outcomes are weather outcomes, and choices about input use and ex ante risk mitigation strategies.

The organization of this paper is as follows. Section 2 reviews the literature on the effects of market access, production risk, and gender on input use and agricultural productivity in developing countries. We describe the characteristics of our study sites in Uganda in terms of access to markets and maize yield variations in Section 3, and report regression results on fertilizer use, hired labor use, and maize yields in

> 2 A partial list of organizations promoting smallholder productivity gains as a pathway for rural development includes the World Bank, FAO, IFPRI, AGRA and the Gates Foundation (Larson et al. 2013).

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